What
the Democratic takeover means for housing | | |
| Observers expect Frank to take a more active
approach than Dodd on housing-related issues.
Kurt Pfotenhauer, senior vice president for government
affairs and public policy for the Mortgage Bankers Association,
says: "Frank is a real housing advocate who's got a fairly well-articulated
vision of where he wants to go and is very eager to pass legislation
while he has that gavel in his hand."
Pfotenhauer speculates that among Frank's priorities
will be enacting stricter oversight over mortgage giants Fannie
Mae and Freddie Mac, reforming the Federal Housing Administration
Mortgage Insurance Program and combating predatory lending.
Fannie Mae and Freddie Mac are government-sponsored
enterprises, or GSEs -- corporations that exist to keep money circulating
in the mortgage market. When you get a mortgage, your lender can
sell the loan to Fannie or Freddie, freeing up money so the lender
can underwrite a mortgage for someone else. Both companies have
been involved in accounting scandals, and some members of Congress
worry that they have grown too big to fail and that they should
focus more effort on putting more money into the hands of low- to
moderate-income borrowers.
A GSE reform bill would be designed to keep Fannie
and Freddie stable over the next few decades.
More for low-income housing
"I think the one immediate impact we'll see when we
get a bill passed is the creation of a housing trust fund that will
push a little bit more capital into low- and moderate-income housing,"
Pfotenhauer says.
Frank has expressed support for a proposal to let
the FHA charge more to insure the mortgages of the riskiest borrowers,
and to give discounts to less risky borrowers. But he wants those
riskiest borrowers to get some of the money
back if they keep current on their mortgage payments for five
years.
That proposal was nixed by the Republicans, but it
will have renewed life with Frank as committee chairman.
As for predatory mortgage lending, the
term is difficult to define. Several states and cities have enacted anti-predatory
lending laws that limit interest rates and ban lenders from extending mortgages
that can't be repaid. Some observers expect Frank to depart from liberal dogma
and accept a national standard that would pre-empt state and local anti-predatory
lending laws. "Frank has always recognized that it's counterproductive
to limit the availability of credit," says Paul Leonard, vice president of government
affairs for the Housing Policy Council of the Financial Services Roundtable. "He
recognizes you need a uniform standard that protects consumers but doesn't have
the unintended consequence of lenders pulling back on consumers."
Advocates wait
Consumer advocates take a wait-and-see attitude about
the liberal representative from Massachusetts.
"I think Barney Frank will be good in some respects
and not as good in others," says Bruce Hahn, president and CEO of
the American Homeowners Grassroots Alliance.
The good: Hahn believes that there's a better chance
that Congress will make private mortgage insurance payments tax-deductible.
"I think it's going to help expand homeownership among low- to moderate-income
borrowers," Hahn says. "Prospective buyers would be able to deduct
more and, therefore, afford more."
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