The Great Unbundling
As we noted yesterday, FHFA has decided not only to unbundle second and high-dollar loans from its flat-fee paradigm, but now to do the same for about one in five conventional conforming purchase loans outside these categories. Together with new cash-out refi fees, the agency is recrafting Fannie and Freddie into an express risk- and mission-pricing construct that alters the essence of the GSEs and thus of the market as a whole.
One Way Down
As will be evident in our forthcoming in-depth analysis, the CFPB’s fusillade last week on mortgage-finance could have far-reaching implications for the entire market based on how far it takes its new campaign for equitable housing finance and whether the market is willing to come along on at least some of the agency’s new ideas. And, of course, the Bureau could well follow up an implicit threat to force new mortgage products if the industry proves unwilling to comply with its social-justice vision. It will take months, if not years, to finalize many of the rules outlined in the RFI, but this schedule is subject to change without notice if the Bureau decides to rewrite mortgage finance by edict, not administrative process. Indeed, new CFPB enforcement actions tackling refi-borrower risks seem imminent. FHFA and/or HUD action to support or even mandate some of the CFPB’s ideas would also be radical redesign in one heck of a hurry.
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CFPB Starts Mandatory Refi, Loan-Mod Redesign Project
Expanding its actions to increase consumer-finance innovation and competition, the CFPB today began an effort to increase refi accessibility as well as provide for automatic loan modifications. The release reiterates Director Chopra’s assertions that rules prior to the Bureau’s new approach were unduly favorable to industry, especially when innovation is authorized only via no-objection letters, sandboxes, or similar agency actions.
Treasury Presses Open-End Bond Fund Rules
In remarks today on Treasury-market stability, Under-Secretary Liang focused on open-end corporate-bond funds. Noting that these funds use Treasury securities for liquidity but lack stress resilience and thus caused the “cash for cash,” Ms. Liang strongly supported the SEC’s focus on open-end fund liquidity, pricing and resilience.
House Republicans Take New Tack to Constrain the CFPB
Joined by Republicans on the House Oversight Committee, HFSC’s GOP today continued its campaign against Rohit Chopra, giving the CFPB director only a week to provide them with an explanation of how many recent actions comply with the Supreme Court’s recent restrictions on administrative action.