Frank Pallotta addressed both business and consumer needs in the mortgage industry during the recent economic downturn. He would like to bring these skills to Congress now to aid with the current one.
"I want to do what I've always done, which is find a problem, tackle the problem, find a solution, and move on to the next problem," said Pallotta, a former mortgage professional who represents New Jersey's fifth congressional district as a Republican this fall, said in an interview. "I have a general understanding of the real estate market, a general understanding of the economy, and a general understanding of this partisan world we live in. I think that puts me in a unique position."
Pallotta worked with mortgage bankers as a managing director at Morgan Stanley before the Great Recession and helped set up a small startup that helped borrowers repay underwater loans after they hit. He said he was basing himself on some other former finance professionals who worked in Washington.
His role models include Treasury Secretary Steve Mnuchin and Craig Phillips, former Treasury Secretary between 2017 and 2019. Pallotta sees them as practical rather than partisan approaches to questions he would face in his election.
Mnuchin, for example, has pushed for a compromise between the parties on fiscal incentives to address health and economic concerns over the coronavirus outbreak. and Phillips stopped and fulfilled aspirations to work in the Treasury Department despite the fact that the Democrats he originally supported lost the 2016 elections.
Pallotta favors market-based approaches over public mandates in line with his political party. He cites the strategies he has developed to prevent borrowers who owe more than their homes were worth from involuntarily or strategically defaulting.
In one case, he helped develop a program for a bank that wanted to help veterans repay their underwater loans by devising a formula that would reduce their principal debt by a certain amount in return for on-time payments.
He said he volunteered to share this information with government officials who have been devising programs to combat the housing crash and several have met with him. While the strategies and related operations he was involved in ultimately didn't get directly incorporated into public programs, he said that in some cases private companies have used his company's services to fulfill government mandates. For example, his company's call center was used by customers to change loans in accordance with federal guidelines.
Pallotta's work in the mortgage industry has proven to be a mixed blessing in the mixed partisan struggle for the seat he is running for. Republicans held this seat for a long time until Josh Gottheimer, former Clinton administration speechwriter and Microsoft marketing strategist, flipped it in 2016.
Mike Gwin – a spokesman for the Democratic Congressional Campaigns Committee that supports Gottheimer – criticized Pallotta's work in the mortgage industry prior to the Great Recession, claiming Pallotta played a key role in loose underwriting at the time.
Pallotta said he worked with lenders during the housing bubble who sold loans to Morgan Stanley and received other investment banking services from Morgan Stanley. However, he also helped in the post-bubble recovery by using his knowledge of the business to develop programs that helped borrowers and mortgage lenders alike.
He believes private strategies could help both consumers and businesses cope with the wave of the mortgage crisis that has also resulted from the current crisis. Pallotta added that while he does not seek public mandates to address issues, he does advocate government programs that encourage businesses to meet the special needs of community members such as veterans or the elderly.
Here he would be looking for a middle ground that would allow a bipartisan compromise in his election, he said.
"I don't really think in their hearts that the parties are that far away, especially when it comes to wanting to help people. That is true, whether it is a tax problem, a housing problem, or a safety or health problem," he said. "I'm not going to say I don't care about the party, but I think you should listen to the idea first and then make your decision instead of based on whether the idea comes from the left or the right. I don't turn to you only to one party to make decisions that are in the best interests of our citizens, residents and voters. "