Biden’s new housing fight

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Mar 19, 2024 View in browser
 
POLITICO Morning Money

By Katy O'Donnell and Zachary Warmbrodt

Presented by

the American Bankers Association

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QUICK FIX

In his campaign to lower housing costs, President Joe Biden is singling out an obscure corner of the mortgage industry and beginning to trigger a backlash.

At issue in the new housing industry fight is title insurance, which protects lenders and homebuyers from disputes over the legal ownership of a home. Biden said in his State of the Union address that he wants to scrap title insurance fees for federally backed mortgages.

Critics in the industry and on Capitol Hill are accusing the Biden administration of meddling with an independent regulator for political reasons. The push to eliminate the insurance on certain loans sold to Fannie Mae and Freddie Mac, the government-controlled companies underpinning half the residential mortgage market, is sparking bipartisan pushback in Congress over concerns it could expose consumers and taxpayers to more risk.

House Republicans are pledging to investigate Fannie and Freddie’s regulator, the Federal Housing Finance Agency, over a new pilot program waiving title insurance on certain refinancing loans sold to the companies.

In a letter obtained by POLITICO, Reps. Warren Davidson, Bill Huizenga and Andrew Garbarino told FHFA Director Sandra Thompson that the agency's announcement in unison with the State of the Union address "reveals a partisan agenda."

Lenders and title insurers say they were blindsided by the State of the Union mention and that the campaign against closing costs is misguided.

“This is a political move to deal with economic challenges that the White House has,” said Chris Morton, chief advocacy officer at the American Land Title Association, an industry trade group. “This was something they threw at a wall and overruled both sides on the Hill [and] the regulator.”

An FHFA spokesperson said Fannie submitted the pilot – which the agency expects to save homebuyers between $300 and $1,500 when they refinance – about a month before the State of the Union.

“Really the pilot is about testing the concept, and it may or may not be expanded and made permanent,” FHFA Chief of Staff Karen Chang said. “I think we’ll take the data and based on that decide whether to move forward with a permanent program. … Right now we’re just trying to test the concept in a low-risk population.”

But even some Democrats are wary of efforts to bypass traditional title insurance, pointing to the potential for consumers to get hit in the event of a title defect.

“It’s up to state insurance commissioners to determine the price of title insurance,” said Rep.Brad Sherman (D-Calif.). “Title insurance is a better product for homeowners because it provides a guarantee.” Sherman co-sponsored legislation to require title insurance on all loans sold to Fannie and Freddie.

Housing policy experts also warn of additional risk to the government-owned companies’ bottom line.

“As the largest two holders of mortgage credit risk in the country, and being backed by taxpayers, Fannie Mae and Freddie Mac should be careful to avoid increasing title risk,” wrote Ed DeMarco, who was acting FHFA director during the Obama administration and how heads the Housing Policy Council trade group, in a letter to Thompson Friday. “After all, waiving traditional title insurance coverage does not make the risk go away. Someone is holding it.”

Read more here.

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A message from the American Bankers Association:

Get a front row seat to the banking policy debate at ABA’s Washington Summit. ABA President and CEO Rob Nichols kicks things off at 8:30 AM ET, followed by a panel of bank CEOs from across the country and a regulatory discussion featuring former Federal Reserve Vice Chair Randal Quarles, former FDIC Chair Jelena McWilliams and former CFPB Director Kathleen Kraninger. The Points Guy founder Brian Kelly will also discuss the fight to protect Americans’ credit card rewards. Watch live.

 
Driving the day

The FOMC begins its two-day meeting at 9 a.m. … House Majority Whip Tom Emmer, former FDIC Chair Jelena McWiliams and former Fed Vice Chair for Supervision Randy Quarles are among the speakers at the American Bankers Association’s Washington summit

MM first look: ABA signals legal hardball — American Bankers Association president and CEO Rob Nichols will kick off the group’s Washington conference today with a warning: The industry isn’t afraid to keep turning to the courts as it fights a “tsunami” of Biden-era regulation.

“When [regulators] insist on finalizing rules that fall outside their regulatory purview, and when they ignore constructive feedback from banks and other stakeholders, litigation is the only remaining tool in our toolbox,” he said in prepared remarks. “Again, it’s not a tool we want to use ... but it’s one we will continue to strategically wield as needed.”

Fed hopes fade — The FT, citing Bloomberg data, reports that traders are attaching a 48.6 percent chance to a quarter-point cut in June, down from 50.1 percent on Friday and 62 percent a week ago.

In a letter to Fed Chair Jerome Powell Monday, 21 lawmakers led by the Congressional Progressive Caucus said the FOMC should present a “clear and rapid timetable” for cutting rates, ideally beginning in May. Sens. Bernie Sanders and Elizabeth Warren signed the request.

 

JOIN US ON 3/21 FOR A TALK ON FINANCIAL LITERACY: Americans from all communities should be able to save, build wealth, and escape generational poverty, but doing so requires financial literacy. How can government and industry ensure access to digital financial tools to help all Americans achieve this? Join POLITICO on March 21 as we explore how Congress, regulators, financial institutions and nonprofits are working to improve financial literacy education for all. REGISTER HERE.

 
 

SEC sends new AI message — Investment advisers Delphia and Global Predictions agreed to pay penalties to settle charges that they made false and misleading statements about their use of AI, Reuters reports. In an accompanying video, SEC Chair Gary Gensler warned companies about “AI washing.”

“Everyone may be talking about AI, but when it comes to investment advisers, broker dealers, and public companies, they should make sure that what they say to investors is true,” he said.

In a new POLITICO Tech podcast out today, Gensler describes an AI doomsday scenario: “I would be quite surprised if in the next 10 or 20 years a financial crisis happens and there wasn't somewhere in the mix some overreliance on one single data set or single base model somewhere.”

Remember PPP? — The FTC struck a $59 million settlement with fintech firms Womply and Biz2Credit over charges that they made false promises to small businesses seeking to take part in the Covid-era Paycheck Protection Program. The FTC said the $33 million settlement with Biz2Credit and the $26 million settlement with Womply were the largest damages amounts ever secured by the agency under Section 19 of the FTC Act.

MM readers: Are you dealing with any lingering PPP concerns? Drop a line to Zach.

 

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Regulatory Corner

IMF warns on bank failures — The IMF’s Tobias Adrian and Marc Dobler write that, based on learnings from last year’s banking turmoil, “there is still further to go in putting an end to too-big-to-fail.” They’re calling for policymakers to better empower banking supervisors, ensure that resolution plans are flexible and strengthen deposit insurance.

Hedge funds groups sue the SEC — MFA, the National Association of Private Fund Managers and the Alternative Investment Management Association are taking the agency to federal court in Texas in a bid to block its recently adopted dealer rule, Declan Harty reports.

A message from the American Bankers Association:

Join us at 8:30 AM ET today for ABA’s Washington Summit — the nation’s premier conversation on banking policy. Today’s program features a panel of former top regulators from the Fed, FDIC and CFPB who will share their thoughts on the wave of new regulation threatening America’s banks. House Majority Whip Tom Emmer (R-MN), a member of the House Financial Services Committee, will offer a legislative outlook. And ABA President and CEO Rob Nichols will sit down with The Points Guy founder Brian Kelly to discuss efforts in Congress to defeat legislation that could end popular credit card reward programs and hurt consumers, the travel industry and America’s banks. Wednesday’s program includes Rep. Josh Gottheimer (D-NJ), Sen. Katie Britt (R-AL) and veteran political strategists Donna Brazile and Mike Murphy. Watch live.

 
Climate

Inside the anti-ESG fight — CNN has a new look at the behind-the-scenes role that the Foundation for Government Accountability, a conservative think tank, has played in helping stoke the anti-ESG investment movement across the country.

 

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