| WASHINGTON, July 29
WASHINGTON, July 29 U.S. bank regulators, wary
of upsetting the fragile housing market, are moving cautiously
in fashioning dozens of new rules to prevent reckless
underwriting and other mortgage market abuses.
In implementing the 2010 Dodd-Frank financial reform law,
the regulators have said they are sensitive to arguments from a
rare alliance of both lenders and consumer groups that too-tough
rules could hamper credit availability.
Last week, citing sources familiar with the matter, Reuters
reported that officials from six agencies that oversee housing
might ease a proposal requiring lenders to keep a portion of
securitized mortgages on their books. Consumer groups and
lenders alike had pushed such a change.
The Federal Reserve and other agencies had already decided
against requiring banks to raise more capital to fund their
residential mortgage lending.
And an unexpectedly cooperative relationship has developed
between banks and the newly created Consumer Financial
Protection Bureau, which has broad authority to regulate
"Listen, I think everybody is trying to make sure the
housing market doesn't lead the country into another double-dip
recession," said Barry Zigas, director of housing policy for the
Consumer Federation of America.
Analysts say rising home prices, which support household net
worth and boost consumer confidence, keep the economy resilient
despite government spending reductions.
New-home sales jumped to a five-year high in June, but
recovery is still considered shaky. A realtors group on Monday
reported that contracts to purchase previously owned homes fell
Regulators walk a fine line: Lending practices remain fairly
conservative, but too much leniency could prompt a return to
shoddy lending practices. Bartlett Naylor, who tracks financial
policy for advocacy group Public Citizen, called the dilemma a
"very important and dangerous issue."
TAKING A COMPROMISE STANCE
The biggest clashes over revising lending procedures
involved the consumer bureau, which was charged with
implementing key provisions of Dodd-Frank and was criticized as
overly powerful by lenders and by Republicans in Congress.
Consumer groups and lenders said the bureau struck a balance
with its first major mortgage rules, including a requirement
that lenders be able to verify that borrowers could repay loans
that was released in January.
Since then, bank lobbyists say bureau officials remain
attuned to their concerns about complying with the many new
rules. In some cases, the bureau has even revisited final rules
and amended technical aspects in response to banks' comments.
"The bureau should be credited with continuing to listen,"
said Bob Davis of the American Bankers Association. "But the
fact that they're having to do so suggests that the package of
rules still has flaws."
The bureau hired a Fannie Mae official to help implement its
rules, which also include requirements for mortgage servicers,
and a Freddie Mac official to reach out to businesses.
Kelly Cochran, the bureau's assistant director for
regulations, said officials knew they would need to continue
"fine-tuning around the edges" to implement the many new rules.
"We are trying to make this a learning process for
ourselves, to get a deeper insight in how financial service
providers implement changes and the issues that they face," she
said. Bank lobbyists say the concern now is that the bureau's
tinkering could make it difficult to comply with all of the new
rules by the January 2014 effective date.
The next big challenge facing lenders will come when the
Fed, the Federal Deposit Insurance Corp and other agencies put
out the rules requiring lenders to keep a stake in securitized
loans. The "skin-in-the-game" rules would force lenders to keep
5 percent of most loans on their books.
Consumer advocates and bank lobbyists say they want this
group, which does not include the CFPB, to follow the consumer
bureau's even-handed approach.
"I think the CFPB is a poster child for balanced
rule-making," said Julia Gordon, director of housing finance and
policy at the Center for American Progress, a left-leaning think
The regulators are expected to revisit the risk-retention