Housing Finance

On January 7, 2020, the presidential campaign of Senator Elizabeth Warren released a plan to overhaul the consumer bankruptcy system in the United States. The plan would repeal means testing and other provisions of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act. It would also implement enhanced protections for consumer debtors who file for bankruptcy.

Perhaps most significantly, the plan would abolish the “undue hardship” standard for the discharge of student loans. Under current law, borrowers seeking to discharge student loans must file a separate adversary proceeding alongside their non-adversary bankruptcy case and make a significant showing of hardship. The plan would treat student loans identically to other types of consumer debt, allowing for their discharge without any special showing.
Continue Reading Warren Proposes Far-Reaching Consumer Bankruptcy Reforms

On March 27, 2019, the White House released a memorandum on federal housing finance that instructed the Treasury Secretary to develop (i) a “Treasury Housing Reform Plan” that addresses the roles of the government-sponsored enterprises (GSEs) – Fannie Mae and Freddie Mac – and (ii) a “HUD Reform Plan” for certain programs of the Department of Housing and Urban Development (“HUD”), the Federal Housing Administration (“FHA”), and Ginnie Mae.  Once completed, the Secretary is to submit the plans for approval by the Assistant to the President for Economic Policy.  Plans that follow the memorandum could, but not necessarily would, result in significant changes to the federal role in mortgage finance and affordable housing.

The memorandum sweeps broadly across the federal housing finance system and does not include the level of detail in the reforms that Senator Mike Crapo (R-ID), the Chairman of the Senate Banking Committee, outlined in February of this year (the “Crapo Proposals”).  The President’s memorandum and the Crapo Proposals generally are not inconsistent, although the plans ultimately resulting from the President’s memorandum could depart in various respects from the Crapo Proposals.

Although many of the goals in the President’s memorandum are general in nature and have been proposed before, including termination of the GSE conservatorships, the objectives identified in the memorandum warrant attention.  The Treasury Housing Reform Plan implementing the President’s memorandum is to address the following :

  • Preservation of the 30-year fixed-rate mortgage loan;
  • Equal access to the federal housing finance system for lenders of all sizes, charter types, and geographic locations;
  • Creation of a cash window for loan sales;
  • Authority for the Federal Housing Finance Agency to approve guarantors of conventional mortgage loans in the secondary market;
  • Possible changes to the GSEs’ policies on loan limits, program and product offerings, credit underwriting parameters, and the use of private capital to transfer credit risk;
  • Size and risk profiles for the GSEs’ retained mortgage and investment portfolios;
  • Greater definition or clarification of several activities of the GSEs, including their roles in multifamily mortgage finance and affordable housing, and of the mission of the Federal Home Loan Bank system and its role in supporting federal housing finance (the Crapo Proposals would require Fannie and Freddie to sell off their multifamily businesses, but the President’s memorandum does not include this specific requirement); and
  • Evaluation of the “QM Patch,” which exempts GSE-backed loans from certain requirements of the qualified mortgage definition under the rules of the Consumer Financial Protection Bureau.

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Continue Reading GSE Reform: The President’s March 27 Memorandum