You may recall the Tennessee Williams play ‘A Streetcar Named Desire,’ which arguably has more classic lines than any other American dramatic work. My favorite line is uttered by the play's tragic heroine Blanche DuBois: ‘I don't want reality! I want magic!’
That train of thought (or streetcar, if you will) seems to be chugging along in our industry, as witnessed by very curious statements from Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee. Frank expressed outrage over the allegedly pokey state of jumbo mortgage activity. However, I believe his view of the situation and his proposed solution leans closer to magic than reality.
At last week's Mortgage Bankers Association Secondary Marketing Conference, Frank complained that recent legislation designed to raise conforming loan limits for Fannie Mae and Freddie Mac was not producing immediate or satisfactory results.
‘I am disappointed,’ said Frank. ‘We fought very hard to raise the loan limits for Fannie and Freddie, and there have been a lot of problems in implementation.’
Frank added that he planned to hold hearings on May 21 to determine why the process isn't zooming along. Industry leaders and the heads of Fannie and Freddie are going to be called to testify.
So what's wrong with this situation? For starters, Frank seemed to forget that the new rules regarding the raised loan limits only took effect on April 1. After a mere five weeks, he was immediately declaring it a failure. Isn't that a bit premature?
Admittedly, things are moving slowly here. But that should be expected. After all, neither Fannie nor Freddie has a great deal of experience handling jumbo mortgages. Furthermore, agency-conforming jumbo loans are a relatively minor slice of the overall mortgage market – anyone expecting a magical industry-wide adrenaline shot from frenzied jumbo activity is sadly mistaken.
And let's not forget that mortgage-backed securities aren't exactly selling like the proverbial hotcakes. In fact, I think more hotcakes are being sold today than securities.
Frank's sudden penchant for instant gratification from Fannie and Freddie is curious, given that his House leadership spent more than a year talking about the idea of government-sponsored enterprise reform legislation without actually addressing the issue through legislation. The House's May 8 passage of the ‘American Housing Rescue and Foreclosure Prevention Act’ came about after a ridiculously prolonged gestation period, and there's still no end in sight – it has to pass the Senate, and then it faces a possible presidential veto that will bring the issue back to square one. Â
Also, Frank didn't voice public concern when Sen. Chris Dodd, D-Conn., virtually paralyzed the legislative process for half of 2007 by leaving the Senate Banking Committee on indefinite hold while he moved to Iowa in a vain attempt to snag the Democratic presidential nomination. The much-needed Fannie and Freddie reforms literally stalled in the Senate due to Dodd's actions.Â
Still, Frank insists there is a problem with the jumbo situation that demands immediate resolution. ‘There is a chain of people blaming each other, and we're going to call everybody in there into the hearing and find out why,’ he said.
I'm sorry to disagree with Frank, but a statement like that resonates with poor Blanche DuBois' hunger for magic in lieu of reality. There are serious problems that need immediate attention, and hastily assembling diversionary congressional hearings over this fairly minor matter is very strange. And even if the meeting proceeds as planned, it is highly unlikely that a magical answer will pop up.
I wish I knew Frank personally, because I would love to sit down with him and politely tell him that he's off course (I would also love to see the industry's leaders do the same). But I don't know if he would pay heed to such concerns. After all, not everyone shares Blanche DuBois' ability to rely on ‘the kindness of strangers.’
– Phil Hall, editor, Secondary Marketing Executive.
(Please address all comments regarding this opinion column to hallp@sme-online.com.)
