Monday, September 5, 2016

Happy Labor Day, America!

Let’s shake those dice, get some juicy GSE talk going as the Congress returns this week to do very little but complain about each other and posture for the November elections.

You might hear some congressional GSE bellowing, especially if there is a plaintiffs’ decision in one of the major court cases. But, for the most part any Fannie/Freddie discussion will be about replacements and alternative mortgage system models.

As I’ve noted several times, I have a great deal of professional respect (awe, actually) for “the real” Tim Howard’s financial acumen and blogs, which keep producing high quality GSE analysis and commentary.

Tim—who sees an active future role for the GSEs--is temperate in his views of those who favor dismantling Fannie and Freddie. He’s reached out to some of them, and engaged successfully with others who want to learn more of his thinking.

Let me suggest a brief comparison/distinction between Tim and me, which favors him mightily.

I am more emotionally drawn to the GSE model because when I worked at Fannie—having worked in Washington legislative or regulatory operations overseeing most of the financial interests--I believed (and still believe) Fannie/Freddie was/is the systemic superior mortgage execution for consumers of all income levels and ethnicities, as well as lender and non-lender mortgage finance professionals, who generated income and jobs from Fannie’s and Freddie’s core work.

Tim Howard approaches the question of possible successor mortgage models in a far more macro intellectual and multifaceted manner, mentally weighing the tradeoffs and comparisons as he measures the competing models’ capacity to meet certain bedrock objectives including capitalization and assuring debt and securities investor confidence in various approaches.

Except for Tim, Jim Millstein, Josh Rosner, Bethany McLean, and Maloni--sorry if I missed one or two others--most of those proposing new national mortgage finance model stay away from the twins like they do a gas station restroom, then cast themselves into an anti-GSE punji stick pit, ignoring anything of value or success in the Fannie/Freddie history.

Rather than, bravely, lean into the prevailing political breeze/wind as Howard has done, most in the “never the GSEs” crowd accept the largely bogus, partisan indictments and contend nothing about the GSEs is worth maintaining offering partisan rationales which they can’t comprehensively articulate but they assume most people understand.
I’ve almost—but not quite--run out of ways to explain how very wrong they are.

Naysayer Complaints…

“The GSE executives and employees made money, their companies lost money, which means they had a bad business model, right? Besides, isn’t that what this Administration and the GOP say?”

“Well, the future can’t have anything which looks or operates like Fannie and Freddie, so let’s see what bell and whistle festooned claptrap we can dream up, appealing to the big guys, and—employing our sterling reputations institutional reputations--sneak past/through a Congress which knows even less than we do about mortgage lending?”

”OK, the GSEs are well regulated and they can’t buy, securitize, or touch high risk loans, but the government is standing behind them, right?”

(If that last one is a deal breaker, why do most of their schemes have Uncle Sam behind the same primary market institutions facing many of the same risks, but pretend that’s not the case, as they flaunt their Urban Institute schemes and seek to anoint themselves with mortgage finance sainthood?)


Those pessimists need to get their heads from their behinds and start looking at what did succeed and works for middle and low income Americans and some with bruised credit, who still aspire to own a home.

Existing regulation, implemented since 2008, has removed the most significant problem with the old GSE operation, i.e. the risk quality of the mortgages in which they can traffic.

Ergo, my advice to the GSE opponents--masquerading as thoughtful mortgage market stakeholders--is start with that which exists, acknowledge where it succeeds, fix what you think is broken, and don’t waste your time creating a mortgage market Camelot carousel—which never will get through the “we have little idea what we are doing, but we insist on to tinkering” Congress.

Simple is good

Chuck your “blow up the GSEs” mantra which only cedes mortgage market controls to the nation’s big banks, a very bad choice/result.

Policy makers and the public require/deserve something less gaudy, but which mandates big commercial bank lenders obey the sane, low risk GSE underwriting guidelines.

And, if you follow the “utility model” ideas authored by some of those names I mention above, you’ll see greater consumer mortgage savings and lower commercial profits, if those were part of your GSE brief.


The Mortgage Bankers Association

“Keep your friends close, but your enemies’ closer,” Marlon Brando in “The Godfather”


kəˈmēlyən/noun: American chameleon; plural noun: American chameleons; a person who changes their opinions or behavior according to the situation.

Paul Muolo, writing in last Friday’s Inside Mortgage Finance, beat me to something on which I was planning to focus, the statement by MBA president David Stevens greenlighting negotiating with White House and Congress over reducing or removing the mortgage interest deduction, a tax provisions which is/has been the Holy Grail for Realtors, builders, and lenders for decades.

Muolo notes that Stevens and his team started walking back the comments, which to me is their standard MO. But, also to me, it suggests someone’s worried about of how DS’s apostasy might fall on the ears of his housing industry brethren, if not the home buying public?

In trade leadership vacuum, Stevens has taken to leading the National Association of Realtors (NAR) and the National Association of Homebuilders (NAHB) by the nose on GSE matters, including endorsing anything Senator Bob Corker (R-Tenn.) proposes.

Some of us think that is unwise policy as well as a cloven-hoofed congressional horse.

The MBA exec’s comments—when added to past actions--suggest he can play congressional poker and bet/bluff with the MIDI. That should worry some inside the Beltway actors, current mortgagors, and future Builder and Realtor customers, if they still care about the deductibility of those monthly mortgage interest payments.

Mr. Stevens may think he’s more facile than his peer trade association execs --and maybe he is. The others might believe little can happen to those legacy programs and policies their members have supported, historically, but recently from which the trade groups have begun to slink away.

Because it is germane—and hoping to open a few pairs of eyes—last week, I reminded a senior trade friend what Protestant Pastor Martin Niemiller, in 1947, wrote in his chilling WWII Nazi atrocity account, after the clergyman served seven years in a Nazi concentration camp.

First they came for the Socialists, and I did not speak out—
Because I was not a Socialist.

Then they came for the Trade Unionists, and I did not speak out— 
Because I was not a Trade Unionist.

Then they came for the Jews, and I did not speak out— 
Because I was not a Jew.

Then they came for me—and there was no one left to speak for me.
Maybe supporting Sen. Corker and opposing the small community lenders and civil rights groups--which want the GSEs recapitalized and kept alive-- has emboldened the MBA’s ego and made its leaders think they can start MIDI negotiations on behalf of the Builders and Realtors, just as MBA has on the GSEs.

Wake up “housers,” because when they come for you and your tools, there may be nobody left to defend easy homeownership access.

Maloni, 9-6-2016


Anonymous said...

Hey Bill,

Thank you for keeping this blog alive!

I like your ending sentence: Wake up "housers"...
But how will they wake up? If they don´t know what's going on?
Don't you think that it's time to start with
the "transportation idea" I sent you from Charlotte?
Can you call the other guys and tell me what they think?
They will take your call because they know you very well


Bill Maloni said...

Anon--two of us love the "transportation idea." The big guy plaintiffs aren't responding and my guess is they have bigger fish to fry, including considering major costly major appeals if they lose the next round.

As we discussed, it may be more effective if you have an event around which (no pun intended)
you go to "the transportation" idea?

Did you figure out who will underwrite the exercise?

Anonymous said...

I did not figure out who wiil underwrite this excercise, but the cost is very very low. Mybe 10 grants per month. When you split it among several plaintiffs comes to nothing (for their wallet size, of course)

Bill Maloni said...

Yes, but for lesser mortals--who may be the only ones in love it--it would be different.

My suggestion is to cost it out, acquisition of the main item over your 30 day(?) timeframe, and your desired signage.

I have no idea about necessary permits, licenses, etc., but if they are required, it adds to the cost.

Bill Maloni said...

Ooops "with it"

Matt Hill said...

I'm not sure what the transportation idea is. But if you have a free day, just grab a friend and hold a big #FannieGate sign over a busy freeway overpass. That should get the ball rolling and no grants would be needed.

Bill Maloni said...

Matt--Our friend has a good idea, a bit elaborate and theatrical--with some rough edges--but it would be a GSE-attention grabber.

(But so would setting myself on fire!!)

It's up to him to reveal it--if he chooses--and let other pro-GSE allies respond.

(Our friend--unlike many others who hide behind "anonymous" has legitimate vocational reasons for keeping his identity out of the discussion.

Matt Hill said...

Excellent Bill!

There's got to be an idea out there that brings this whole saga into public light. Don't know if we'll ever find it, but I hope no one ever gives up.

Fortunately, judges don't like to be contemptuously mislead the same way they are misleading the general public. I know it's hard to sue the government. But this is not like anything else. It can't be categorized generally into any past precedent. We are in unchartered waters and lunacy always carries an expiration date.

Bill Maloni said...

Matt--I would be misleading you if I said I am confident in our courts supporting the claims of the GSE plaintiffs.

I've always talked about the infamous "GSE shit wall," based largely on lies which have been shown to be such, yet still influences so many public officials, stakeholders, those in the media, and the judiciary.

Does Judge Sweeney really need this long to see the Treasury Department has been manipulating. patronizing, and lying to her and her court? Does the appeals panel really need more time to see that the government didn't present Judge Lamberth with an accurate picture of F&F's financial situation?

Yet we've had two recent decisions that sound like Lamberth

And what's happened with the slam dunk case in Delaware?

Nothing which happens to F&F surprises me since the two have gotten more short ends of the stick than a troop of cane-dependent "little people."

Don't be surprised by a "six of one, half dozen of the other" AIG decision for GSE plaintiffs, i.e. "The government was wrong, but Mr. Greenburg doesn't deserve any damages!"

Matt Hill said...

Very well put Bill. The chain will be broken on this one. Unfortunately, I may be broke by the time it happens though.

Bill Maloni said...

Matt. for all sots of reasons (selfish and otherwise), I hope I am more wrong than some of those Y2K predictions.

Anonymous said...

Are you DC Bob on timhoward717 ?

Matt Hill said...

We got a win today Bill. Hang in there. They still might yet be able to penetrate the bureaucracy and overcome the GSE shit wall...