1150 Seventeenth Street, N.W., Washington, D.C. 20036
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"The proposed rule swings the pendulum too far and reduces the availability of affordable mortgage capital for otherwise qualified consumers," thirty-nine US senators recently wrote to the heads of bank regulatory agencies. Senator Johnny Isakson (R-GA) added, "The unintended consequence[s] of the rule being proposed . . . [are] lower demand, declining house prices, and a protracting continuance of the worst housing recession in the history of the United States of America." Are we experiencing a cyclical regulatory overreaction that cuts off credit and makes it harder for housing and mortgage finance to recover from the bust? What are the specific problems and issues with the mortgage regulations resulting from the Dodd-Frank Act? How can we strike the right balance between risk and recovery? What should regulators, or Congress, do or not do? These and related questions will be addressed by our expert panel.
ANNE CANFIELD, Canfield & Associates
MARK FOGARTY, National Mortgage News
LAURIE GOODMAN, Amherst Securities
LAURENCE PLATT, K&L Gates
Question and Answer
WASHINGTON, JULY 21, 2011--The Dodd-Frank Act fundamentally changed the US credit system, causing a severe credit crunch and repressing overall economic recovery, experts concluded Thursday at AEI. Anne Canfield, president of Canfield & Associates, noted that the primary flaw in our financial system before the crisis was lack of transparency, but instead of increasing transparency, Dodd-Frank created more institutions and red tape that have limited credit availability and stifled the housing market. Lower Home Owner's Equity Protection Act thresholds and Qualified Mortgage and Qualified Residential Mortgage restrictions have made credit unattainable for lower-income groups, which could extend the housing crisis and permanently tighten credit requirements. Laurence Platt, the practice leader of K&L Gates, said Dodd-Frank regulation increases liability for borrowers and lenders. Increased liability decreases the desire to lend and stifles growth and innovation in the housing market. Platt agreed that the low-income population has been most affected by the regulation and asserted that they will have the hardest time obtaining loans in the future. Laurie Goodman, senior managing director at Amherst Securities Group LP, presented extensive data on the current housing market, concluding that 19 percent of borrowers who had a mortgage in 2007 would not qualify today, and that 10.8 million homes are at risk of default. She and the other panelists agreed that if nothing is done, the mortgage market will continue to diminish and more people will begin to rent. Mark Fogarty of National Mortgage News then noted the severe decline in mortgage value (75 percent in seven years). He explained that the housing market leads the national economy both into and out of recession and is vital for job creation.
Mark Fogarty is the editorial director of the Mortgage Group at SourceMedia, New York. He oversees all the company's mortgage publications and websites, including National Mortgage News, Origination News, Mortgage Servicing News, and Mortgage Technology. He also chairs SourceMedia's mortgage-related conferences. He has worked with the publications for twenty-seven years. Before that, he worked at the Jersey Journal (Jersey City, NJ) and the South Bergenite (Rutherford, NJ).
Laurie S. Goodman is the senior managing director at Amherst Securities Group LP, where she is responsible for strategy and business development. She assembled the strategy team and began publication of the Amherst Mortgage Insight. Previously, Ms. Goodman was head of global fixed-income research and manager of US securitized products research at UBS and predecessor firms. Before that, she spent ten years in senior fixed-income research positions at Citicorp, Goldman Sachs, and Merrill Lynch. She was also a mortgage portfolio manager on the buy side and a senior economist at the Federal Reserve Bank of New York. Ms. Goodman has published more than 180 articles in professional and academic journals, and coauthored and coedited five books. She was inducted into the Fixed Income Analysts Hall of Fame in 2009.
Laurence E. Platt is the practice area leader of K&L Gates's financial services practice and serves on the firm's management committee. At K&L Gates, he concentrates on a range of matters related to real estate finance, mortgage banking, and consumer finance in both the primary and secondary markets. He has been ranked as a top lawyer practicing financial services regulation by Chamber USA. Mr. Platt is a former member of the board of governors of the Mortgage Bankers Association of Metropolitan Washington Inc. From 1989 to 1997, he was on the board of directors for Montgomery Housing Partnership Inc. He also helped found the Unitarian Universalists Affordable Housing Corporation.
Alex J. Pollock is a resident fellow at AEI focusing on financial policy issues, including housing finance, government-sponsored enterprises, retirement finance, corporate governance, accounting standards, and the banking system. Previously, he spent thirty-five years in banking, including twelve years as president and CEO of the Federal Home Loan Bank of Chicago. He is the author of numerous articles on financial systems and the organizer of the "Deflating Bubble" series of AEI conferences. In 2007, he developed a one-page mortgage form to help borrowers understand their mortgage obligations. He is a director of the Chicago Mercantile Exchange, the Great Lakes Higher Education Corporation, and the International Union for Housing Finance, and the chairman of the board of the Great Books Foundation.