Free Money Not Enough? Banks Want More Help on Loans
Some developments in banking not related to Vikram Pandit for your consideration:
- The Consumer Financial Protection Bureau is considering providing lenders a "legal shield" against future litigation if the banks make "qualified" loans, The WSJ reports.
- NY Fed President William Dudley is worried about "concentration of mortgage origination volumes at a few key financial institutions."
At issue here is the fact that banks aren't "passing through" the zero interest rates being granted by the Fed. Sure, mortgage rates are at or near record lows but have you tried to get a mortgage lately? If you don't have stellar credit score and a big down payment, it's nearly impossible to get a loan these days; and even then, it ain't easy.
Of course, nobody wants banks going back to the days of granting loans to anyone who can fog a mirror, but both the CFPB and Dudley are trying to address this issue.
In a speech at the National Association for Business Economics in New York, Dudley said regulators should "foster competition in mortgage origination to ensure a more complete pass-through of low secondary mortgage rates to households."
His recommendations include lowering the fees banks pay Fannie Mae and Freddie Mac. Addressing Fannie and Freddie is a huge unresolved issue but most experts say banks should pay more for the government' backstop, not less.
In a recent interview on The Daily Ticker, former FDIC chair Sheila Bair said forcing the GSEs to charge the banks higher fees for taking the interest rate and credit risk of 30-year mortgages off their books is a key step to ultimately unwinding Fannie and Freddie.
"At some point, the market will find it more economically efficient to fund mortgages themselves than pay higher guarantee fees to the government," Bair told me. "That's the simplest way to do it."
Meanwhile, the CFPB proposal would mandate that judges "rule in lenders' favor if consumers contest foreclosures" for loans that meet certain requirements, The WSJ reports.
While that strikes me of questionable legality, the mortgage industry loves it. Without protection from future litigation, some Americans "will continue to face challenges finding the most affordable mortgages and will find their path to home ownership more difficult," the CEO of the Mortgage Bankers Association told the Journal.
In other words, taxpayer bailouts, free money and endless QE from the Fed aren't enough for the lenders; they want legal protection as well before lending resumes in earnest.
And the beat goes on...
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