After the collapse of the housing market, the Obama administration and Congress took a regulatory hammer to the world of real estate finance. The country saw the mortgage giants Fannie Mae and Freddie Mac put into government conservatorship, essentially nationalizing the secondary mortgage market.
Congress also passed the Dodd-Frank financial reform bill in 2010, the largest overhaul of its kind in decades. Some of its provisions are just now kicking in. Many banks and financial institutions say many of the new rules make lending too expensive or limit access to debt too much. These groups don’t always agree on which protections in Dodd-Frank they’re willing to live with and which ones they are not, but President Trump has made it clear he aims to take an hatchet to the regulations as quickly as he can.
Enter Bill Killmer, senior vice president of legislative and political affairs at the Mortgage Bankers Association, one of the most prominent real estate trade associations on the Hill. According to the Center for Responsive Politics, the MBA was the third-biggest spender on real estate issue lobbying last year, after the National Association of Realtors and the Real Estate Roundtable. It has more than 2,000 members, mainly loan originators, servicers and underwriters. And it’s Killmer who’s charged with taking their agenda to the Capitol. The Real Deal recently caught up with him to discuss what he’s up to. (The interview has been edited and condensed for clarity.)
What is the top legislative priority for the MBA right now?
This would have been true no matter what the outcome of the election, but it’s been reinforced with the players that are on deck: regulatory clarity, ending the uncertainty that’s associated with what the industry has done to be in compliance with the whole Dodd-Frank regulatory regime, in particular. But there are other aspects to that, some that are driven by HUD and FHA, some that are driven by capital regimes like Basel III. But in terms of helping to allow our members do what they do, which is serve their customer base, whether they’re residential lenders or in the commercial multifamily space, that certainty is really something that we’re going to be working on with Congress.
What about the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac?
“That’s something our association and industry has lent a great deal of time, thought and study to and has a great deal of expertise in terms of finding a sustainable system that can be put in place. That will require the new administration working together with the new Congress. There seems to be a willingness to come together and do that, probably later on this year. That’s really all about building a foundation for the appropriate amount of liquidity and mortgage availability so you’ve got a highly functioning and well-executing housing finance system.”
Signals from the hill on that?
“Senator Mike Crapo, the Senate banking committee chairman and Jeb Hensarling, the House financial services committee chairman, have both said this is something they want to work on. They’re going to take slightly different views on that and Crapo’s definitely going to have to build a different kind of consensus than Chairman Hensarling.”
So what’s the major difference here?
“If you’re in the majority, particularly if you’ve got a majority that Republicans have had and continue to have, despite having lost a few seats, you’re feeling unshackled by the fact that you have a White House that is open to having a dialogue about resolving some of these kinds of issues. So there’s going to be less of an opportunity to work in a bipartisan faction. Democrats are going to be a vigorous part of the debate on an issue like GSE reform, but Mr. Hensarling is going to have some well-formed ideas and want to do what he can, having to compromise at some point with the Senate when they produce a bill. With the Senate and the nature of the way that it operates, Chairman Crapo is going to have to work to find consensus in the banking committee. He’s only got a majority margin of one Senate seat over his Democratic ranked member Sherrod Brown (D-Ohio). So to get something out of that committee that has the chance to get to the Senate floor, you’re going to need a bipartisan framework.”
What nuances of Dodd-Frank and GSE reform have been the most challenging to communicate to Congress members?
“On the GSE issue, it’s preserving the appropriate size, scope and role of government in the housing space and the mortgage market. Preserving the 30-year mortgage and having a federal backstop so that there’s investor certainty in whatever new system that you build, improving on the one that created taxpayer exposure a decade ago.
“With respect to these Dodd-Frank changes, that’s why I said we’re arguing for regulatory clarity. A lot of time, energy, effort, money and jobs have been spent or created to make sure that we’re living within the guardrails that Dodd-Frank imposed in the mortgage space. On the issue of, say, the qualified mortgage rule, which flows from title 14 of Dodd Frank, we’re not advocates for blowing that up. That actually does a good job of framing what the appropriate products in the residential mortgage marketplace should be. But in terms of improving that concept, for example, making a permanent statute safe harbor that will give lenders certainty that they’re not going to have undue liability if they’re lending and underwriting [is something we support].
We’re trying to fix some of the temporary solutions that flow from the initial regulatory guidance that was given. The Consumer Financial Protection Bureau (CFPB) implemented the qualified mortgage rule — kind of harmonizing the fact that there are lots of different qualified mortgage standards, some for the government housing program, some for the conventional Fannie and Freddie market… That’s an example of how we’re trying to strike the right balance. We’re not necessarily trying to blow up all those systems, we’re trying to see if there are ways to improve them.”
Thoughts on HUD Secretary nominee Ben Carson and Treasury Secretary Steven Mnuchin?
“The importance is who they’re going to surround themselves with and the teams in the next tiers down, and we feel pretty encouraged that Dr. Carson will bring a different perspective to particularly the urban development side of HUD’s mission, managing the risk associated with the programs at HUD. Given his background we feel pretty comfortable he’s going to surround himself — and this is the sense we get from the administration thus far – with people who do understand at a technical level how these programs have worked, and that’s encouraging.
With Mnuchin, he started working on Wall Street in the mortgage-backed securities space. So probably more so than any Treasury secretary in recent memory, he’ll have a background where he’ll have an understanding of the GSE reform debate.
Is President Trump being a real estate guy significant to what you’re trying to do?
“I think right now my answer to that would be that regulatory temperament is going to change more within a year or two when his folks have had a chance to be online and some of these key appointments are filled. In the interim, Congress I really think will be taking the lead in terms of planning for or crafting solutions that change the regulatory landscape.
The fact that the new president has got a real estate background and understands the landscape I think certainly influences him … but I don’t think it really changes any of our essential methods of going about [lobbying], because clearly you have to work with this team as it’s being assembled and how they’re going to be working to influence the Hill. It’s certainly something that we’re aware of. On the GSE reform question, is he going to have an opinion about Fannie Mae and Freddie Mac? Sure, but it’s not top of mind when he’s working on tax reform, immigration or healthcare, and they’ve obviously got a very active and full agenda.”