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THE LATEST ORIGINATION Housing Looms Large as Ever for Lawmakers New commentary by the Federal Reserve's chairman shows that the mortgage and housing industries continue to be a hot topic on Capitol Hill. A recent hearing held by House lawmakers with Federal Reserve Chairman Ben Bernanke recast housing and the Dodd-Frank Act as issues critical to the economic recovery. In his opening remarks, the central banker said that "afford- ability has increased dramati- cally as a result of the decline in house prices and historically low interest rates on conven- tional mortgages" but that "many potential buyers lack the down payment and credit history re- quired to qualify for loans." 40 | THE M REPORT Bernanke said that 30 percent of home sales recently consisted of foreclosures and properties in distress, reflecting ongoing trouble for a market under- pinned by high home vacancy rates and downward pressure for home prices. The underwriting process, down payments, and pending regulations took center stage during the discussion, with members of the House Financial Services Committee spotlight- ing servicer consent orders and the role of government in the secondary market. Rep. Judy Biggert (R-Illinois) fronted the issue of the Federal Housing Administration, Fannie Mae, and Freddie Mac by asking Bernanke whether taxpayer- funded guarantees for residential mortgages created a healthy economy. The Fed chairman replied by saying that an oversized role for government agencies in mort- gage markets is "obviously not healthy" for the economy. He said that "uninsured secu- rities put together by non-GSE securitizers are not yet as appeal- ing as before" the financial crisis. Biggert also went after Dodd- Frank—notably with Rep. Barney Frank (D-Massachusetts) seated at the same hearing—asking whether rules and regulations could "hurt or help" the return of private capital to mortgage markets. "It's important to create more certainty and we're not there yet" with rule-writing, he said, suggest- ing that regulatory agencies need "greater clarity" to resolve ques- tions over the risk-retention rule. Rep. Maxine Waters (D-California) raised the issue of the $25 billion servicer settlement and recent consent orders for the nation's five largest banks, asking whether servicers will be able to write down loans to "satisfy the penalties levied by the Fed in response to their unsafe and unsound practices." Bernanke replied by saying that "the banks will have to ver- ify that they produce their own holdings and their own assets by the amount of credit they take out. If they don't meet those full amounts [in the consent orders], they will have to pay the rest." SECONDARY MARKET ANALYTICS SERVICING ORIGINATION