Senate Committee Reaches Bipartisan Agreement on Regulatory Relief
Senate Committee Reaches Bipartisan Agreement on Regulatory Relief
For years, those in the housing finance sector have been expecting a comprehensive proposal to ease the overly restrictive and costly post-crisis regulations implemented under the Dodd-Frank Act of 2010. Unfortunately, the Senate Finance Committee’s recently announced legislative plan to foster economic growth through right-sizing regulations has fallen short of expectations.
In a press release on Monday, Senate Banking Committee Chairman Mike Crapo announced that agreement had been reached with several moderate Democrats to amend the Dodd-Frank Act and provide regulatory relief to financial institutions.
While mortgage lenders are supportive of this long-awaited first step, the proposal focuses on regulatory relief for community banks and credit unions, not larger banks. The residential mortgage industry is seeking further relief from the unnecessary regulatory burden that has stifled homeownership for years, and along with it the economic ripple effect of housing construction and renovation activity and local tax and fee generation.
“While lackluster in its current form, the Senate proposal along with the House passage of the Financial CHOICE Act, and the Administration’s regulatory “2-for-1 rollback” and reducing regulation and controlling regulatory costs initiatives, we’re on the right trajectory for meaningful reform,” said Collingwood Group Managing Director Tom Cronin. “The mortgage market has just about peaked under the current regulatory framework, and, in short, we’re not adequately serving the housing demand of middle-income Americans.”
According to the Urban Institute, “increased reluctance to lend to borrowers with less-than-perfect credit killed about 6.3 million mortgages between 2009 and 2015.” Put another way, lending under the reasonable mortgage standards of 2001, 6.3 million families could have achieved fiscally responsible homeownership.
Specific to housing, Section 110 of the Senate proposal, titled No Wait for Lower Mortgage Rate, would remove the three-day wait period required for the combined TILA/RESPA mortgage disclosure if a creditor extends to a consumer a second offer of credit with a lower annual percentage rate. The bill would also amend the Dodd-Frank systemically important financial institution (SIFI) threshold, raising it to $250 billion from the current $50 billion, not surprising after the Fed’s recent “clean bill of health” determination for all 34 banks that underwent the stress test. The package is also expected to institute other legislative changes to mortgage regulations and capital formation.
For a section-by-section summary of the Senate Banking Committee’s “Economic Growth Legislation” click here.
Affordable Housing Could Lose Big in Republican Tax Plan
America needs more affordable housing. That is a fact. How to fund that housing, however, has Republican tax writers in the House at odds with those in the Senate.
It all comes down to a type of tax-exempt bond that funds about half of all affordable (rental/multifamily) housing development. The House tax reform bill — which passed Thursday — eliminates the bond; the Senate bill retains it.
Tax-exempt private activity bonds (PABs) are issued by state or local governments and loaned to private companies to finance qualified projects. The bonds are most commonly used for the construction of affordable multifamily housing, but also for hospitals and infrastructure projects, like roads and bridges.
While most major U.S. cities have seen a boom in construction of luxury apartments and condominiums, the nation is in the midst of an affordable-housing crisis. As home prices and rents rise, more people are in need of this housing, but it is harder to get developers to invest in it. That is because it is a lot more lucrative to build fancy buildings that can command high rent than to build lower-cost rental buildings in less-wealthy neighborhoods. The tax credits have been something of a bridge to entice developers to build lower-cost housing.
read more: CNBC
Why Seattle Real Estate Will Maintain Its Hot Streak
Seattle is one of the hottest real estate markets in the country, and we’re betting on Seattle to maintain growth for the foreseeable future. Limited inventory coupled with significant development, high demand and a constantly evolving marketplace are just some of the reasons why. As such, Seattle represents lucrative opportunities for individual investors (as we’ll see later, international investors are pouring resources into the city): real estate agents and brokers, who will find opportunities in a variety of neighborhoods for a variety of consumers, both traditional and burgeoning, like the oft-sought Laurelhurst neighborhood and the funkier areas that tend to attract younger people such as Green Lake, Ballard and Fremont; and, last but not least, real estate developers who cannot keep pace with the steady stream of buyers.
Seattle is one of the fastest growing American cities, attracting an average of 57 new residents per day from 2015-2016. The real estate market in the downtown area and surrounding neighborhoods is highly competitive, commanding increasingly high selling prices. While the steadily climbing real estate prices have some concerned about a potential real estate bubble, the consensus among economists is that the real estate market’s growth will hold firm. Underpinned by the economic strength of companies such as Amazon and Microsoft, these tech titans are largely responsible for sparking a massive migration of talent to Seattle.
Prospective residents are drawn to Seattle for a number of reasons, not least of which is an abundance of job opportunities. There are a quarter of a million technology jobs in the state of Washington, 90% of which are located in the greater Seattle area. While Seattle’s vaunted tech industry accounts for a large portion of those opportunities, job openings are not limited to its blue-chip tech companies. There’s a dynamic tech startup community, akin to the early San Francisco community, that’s continually rejuvenating the local job market. Also, opportunities are not confined to the tech industry. Many industries, such as professional services, retail, restaurants and hospitality, are all projected to see growth this year.
read more: Forbes
Mortgage Applications Continue to Climb
The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey on Wednesday, covering the week ending November 10, 2017. Mortgage applications were trending positive yet again, up 3.1 percent on a seasonally adjusted basis compared to the previous week. On an unadjusted basis, that number would be 2 percent week-over-week. It’s worth noting, however, that the week’s results do not include an adjustment to account for the Veterans’ Day holiday.
One data point that stands out in this week’s report is that the average contract interest rate for both 15-year fixed-rate mortgages and 5/1 adjustable-rate mortgages (ARMs) are both sitting at their highest levels since March 2017. Fifteen-year FRMs jumped from 3.51 percent to 3.54, and 5/1 ARMs increased from 3.33 percent to 3.41 percent. The average contract interest rate for 30-year FRMs, however, held fast at 4.05 percent.
read more: M Report
House Panel Approval of Rate-Cap Workaround a Win for Online Lenders
A House panel on Wednesday approved legislation that would ensure online lenders can continue to partner with banks to make loans at interest rates that exceed state caps.
The measure, sponsored by Rep. Patrick McHenry, R-N.C., and co-sponsored by two Democrats, passed the House Financial Services Committee by a 42-17 vote. A key legislative priority for the online lending industry, the bill has drawn strong opposition from consumer advocacy groups.
The legislation seeks to blunt the impact of a May 2015 decision by a federal appeals court panel.
In that case, Madden v. Midland Funding, the Second Circuit Court of Appeals ruled that when a bank sold the charged-off credit card debt of a New York state resident to a nonbank, the Empire State’s interest rate cap applied. As a result, high-cost debt that otherwise could have been collected by the bank that made the loan was deemed uncollectible once the debt was sold.
read more: American Banker
We will be on hiatus next week for the Thanksgiving holidays. The Voice of Housing will return on Nov. 27.
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