Mortgage

With Biden's FHA candidate pending, the mortgage market is getting uneven

WASHINGTON – President Biden's candidate to lead the Federal Housing Administration is in limbo as the Senate battles competing priorities, frustrating many in the mortgage industry who are concerned about a lack of leadership at a critical time for the agency.

Julia Gordon – currently president of the National Community Stabilization Trust, a non-profit advocating neighborhood revitalization and housing affordability – was nominated as FHA commissioner in June. Her nomination hearing before the Senate Banking Committee took place in August.

Industry officials and analysts say it is vital for the FHA to have a Senate-approved leader as the housing market is still shaky due to the COVID-19 pandemic. FHA loan default rates are still above pre-pandemic levels, and most government-sponsored deferral plans for crisis-hit borrowers expire at year-end.

It's not clear, however, if the entire Senate will vote on Gordons by then, as lawmakers seek to pass the Biden government's social spending bill and raise the debt ceiling.

"It's important that this happens before the end of the year," said Scott Olson, executive director of the Community Home Lenders Association.

"Things are moving fast in business and FHA is running a hands-on program and that's why we need leadership," he said. "There are many issues that need to be addressed and so it is a high priority and we need to put it on the schedule."

On her nomination, Julia Gordon said the most important thing for the FHA was "to prevent more families from losing their homes" once government-mandated mortgage debt has worn off.

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Gordon's confirmation offer, however, has been controversial regardless of whether Congress has a full record.

While she has received widespread support from both the mortgage industry and community groups, all of whom have cited her extensive housing construction experience, Republicans have urged Biden to withdraw her nomination based on previous comments she felt were unduly critical of enforcement.

With the Senate evenly divided between Democrats and Republicans, Gordon cannot afford to lose Democratic support. (Vice President Kamala Harris could vote a tie in her favor.)

The Senate Banking Committee was split according to party lines when they were nominated. This tie means Majority Leader Chuck Schumer, D-N.Y., Must take an additional procedural step – petition to discharge the committee nomination – before the entire Senate can vote on their confirmation.

“I think the problem for them is that it's a 50-50 Senate. There isn't much political incentive for Republicans to make the verification of a Biden candidate so easy, ”said Ed Mills, political analyst for Raymond James.

Senator Pat Toomey, R-Pa, the senior member of the Senate Banking Committee, was particularly questioned in a letter Gordon wrote last year in her capacity as NCST president following the police murder of George Floyd. of flawed and biased systems that require structural change. "

The lack of Republican support on the committee for their nomination, as well as a jam-packed Senate agenda, have made approving Biden's nominees a lengthy process, said Bill Kilmer, senior vice president of legislative and political affairs for the Mortgage Bankers Association. The trading group supports Gordon's nomination.

"It's an important position, and obviously one of the most important regulatory positions for the industry, so of course we would like to have a confirmed assistant secretary for housing and FTA commissioner as soon as possible, but we get it," he said. "There's a backlog of nominations for the executive … that makes it difficult to get time and at a high cost as the leadership balances things out."

While most will ultimately assume Gordon will be confirmed, analysts say the tectonic moves in the mortgage market fueled by the pandemic require faster action by Congress.

"We're not talking about a corner of government where everything is fine and there is nothing to worry about," said Isaac Boltansky, director of policy research at BTIG. "It's uniquely frustrating that this agency, which has real work to do to improve the health of their book, doesn't have a Senate-approved boss."

At the top of the FHA list, a Senate-approved commissioner would likely take steps to prevent avoidable foreclosures, especially if borrowers leave their forbearance plans.

At their nomination hearing in August, Gordon said the most important thing for the FHA to focus immediately is "preventing more families from losing their homes" once the government's mortgage allowance for most borrowers is by the end of the year expires.

“It will be primarily about maintaining the health of the ledger and promoting positive outcomes for FHA borrowers,” said Boltansky. "There's still a lot to be done there, especially as the indulgence plans have worked out, and I think that will be the top priority for anyone sitting in that chair."

FHA is also in the midst of an ambitious effort to modernize its program and expand its IT capabilities, and is considering updates to its maintenance program, Kilmer said.

Others also hope the FHA will cut mortgage insurance premiums and review its credit premium policy, which requires borrowers to pay annual government insurance premiums throughout the life of a loan.

The Biden government is committed to promoting affordable housing and has included substantial funds in its spending package to that end. But it could pose a barrier to the White House's own goals, Mills said, not having a director in the government agency dedicated to first-time home buyers.

"If you look at the Reconciliation Act, there is $ 150 billion in reconciliation in the most recent housing construction framework," he said. "This is a historic housing investment, and making a potentially historic housing investment without someone running the FHA would be a significant missed opportunity for the Biden government."

While the Department of Housing and Urban Development announced in January that Janet Golrick had served as acting FHA commissioner, Lopa Kolluri, the deputy assistant secretary of the HUD office for housing and the FHA, appears to have taken over the duties of FHA commissioner .

The HUD did not respond to questions about the position of the acting FHA commissioner.

Ultimately, while the FHA has skilled career workers, having a permanent Senate-approved director is ideal, Kilmer said.

"You can't make some of these decisions with the same finality when you're still working with actors," he said.

For some, the inaction on Gordon's nomination highlights greater frustration with the politics surrounding the nominations.

"Not only is Julia Gordon excellently qualified, she may even be overqualified for the role and should have been confirmed by now," said Boltansky. "It seldom happens that you have someone as knowledgeable and respected as they are, ready to serve at this crossroads in their career, and the fact that we are in a limbo is deeply worrying."

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