Ginnie Mae nonbank risk debate renews call for housing 'czar'

Officials at Ginnie Mae and other agencies are debating ways they may be able to get more authority to address government-related mortgage risks involving nonbanks, and one trade group official thinks the answer is a federal position with broader oversight over housing.

This would address one of the challenges for Ginnie, a guarantor for securitized mortgages other agencies back at the loan level, which is that it works with multiple public entities. It's a challenge shared by independent, nonbank mortgage bankers, a trade group executive noted.

"We are frustrated by a very complex web of regulations and regulatory bodies that is overlapping, confusing and ultimately, we think, ineffective," said Bob Broeksmit, president and CEO of the Mortgage Bankers Association, at a Ginnie Mae conference on Tuesday.

The situation calls for "a coordinator at the White House level, whose job it was to look at all of the different entities that have to do with housing and housing finance regulation," Broeksmit said.

Broeksmit has been trying to revive the idea, which was suggested previously by the late former MBA chief David Stevens and some lawmakers in the subprime mortgage crisis, to address more recent concerns like the 80%-plus concentration of nonbank risk at Ginnie.

While there's no single coordinator for housing as Broeksmit and others have envisioned, there is a Financial Stability Oversight Council, which recently studied nonbank risk and called on congress to give entities like Ginnie and the Federal Housing Finance Agency more authority.

Broeksmit suggests a single individual that has oversight across multiple agencies could work toward the same end.

When asked for an example of how a "housing czar" might come into play, he said such an individual could have helped manage the issue of nonbank risks associated with the original version of so-called Basel III endgame capital rules for depositories.

Those rules are now going through a re-proposal process. The original plan threatened to dampen bank interest in providing certain financing lines to non depositories and in buying servicing that nonbanks often sell. (There also was some concern in the original proposal regarding the impact on low downpayment mortgages, but a Federal Reserve official has said the revision will address this.)

A housing coordinator might have seen the potential unintended consequences for nonbanks earlier in the process and accounted for them before the original proposal was drawn up.

"It seems as though, if there were an individual empowered to look at all this stuff, they could say, 'All right, I understand that there may be reasons that your agency is pursuing this, but in the scheme of things, that pushes this in the wrong direction, and is there a better way to approach it?" Broeksmit said.

When asked if that individual might also lack the kind of authority that's frustrated some existing agency officials, the MBA chief said the housing coordinator would have some stemming from the President.

One concern that Ed DeMarco, president of the Housing Policy Council, told conference attendees he had about such a position would be related to a situation where the coordinator had was more interested in fulfilling a particular aim than being impartial.

"The famous saying in Washington is that personnel is policy, and so whoever gets into this coordinating role, if we were to have something like that, I would certainly hope that it's someone that's not there primarily because they have an agenda," said DeMarco.

"They may have an agenda of increasing homeownership. They may have an agenda of getting Fannie and Freddie out of conservatorship. They may have an agenda of something else, right? That's not going to result in effective coordination," he added.