MReport May 2017

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60 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST GOVERNMENT FDIC Official Plots Changes for Dodd-Frank's Bank Regulations The proposal aims to address 'too-big-to- fail' and provide regulatory relief for smaller financial institutions. A top official with the FDIC offered up a blueprint in mid-March that would allow the largest banks to divvy up their financial activities in return for relief from some regulations under Dodd-Frank. FDIC Vice-Chairman Thomas Hoenig presented his plans to attendees at the Institute of International Bankers Annual Washington Conference. If enacted, the new framework would enable banks to separate spheres of traditional activity from more nontraditional ones in return for relief from the regulatory space. The plan would ideally elimi - nate a competitive disadvantage for smaller financial-services in- stitutions unable to keep up with compliance reporting. Hoenig said that Dodd- Frank—while well-intended—had inundated banks with costly and complicated regulations, "espe - cially smaller banks." By making these long-overdue changes, he said, the FDIC and other regulators could also resolve insolvency concerns before they happen. "With these conditions in place, too-big-to-fail would be well on its way to being ad - dressed, and a true opportunity for regulatory relief for these largest banks would be provided," the FDIC official added. Critics have long held that Dodd-Frank imposes a one-size- fits-all approach to regulation that burdens smaller banks with oner - ous compliance requirements. One Harvard study found in 2015 that community banks had seen their shares of assets decline by more than 12 percent since Dodd-Frank's enactment. The study's authors claimed that "an increasingly complex and uncoor - dinated regulatory system has cre- ated an uneven regulatory playing field that is accelerating consolida- tion for the wrong reasons." Hoenig—reportedly under consideration for a top regula- tory job in the Trump administra- tion—announced his proposal as Dodd-Frank's defenders brace for an overhaul of the financial-reform law. Speaking with us for a related story, former Rep. Jim Moran (D-Va.) warned that too much change too quickly could reverse the economic gains seen since the Great Recession. "The financial stocks have never been higher . . . and [banks] have adjusted to dealing with Dodd-Frank regulations," the former congressman said. He added that changes "could backfire" on those who seek to make them, especially if lax regulation leads to regulators eas - ing off too much on banks that should be regulated. The End of Making Home Affordable In its last quarterly report, the Making Home Affordable program revealed it reached 2.8 million homeowners since its inception. T he housing market has made significant strides toward recovery, due in part to the efforts of the Making Home Affordable (MHA) program. The Program Performance Report Through The Fourth Quarter of 2016, some of the last results as all MHA programs ended on December 31, detailed the improvements made since 2009 and assessed the quality of certain servicers. For example, delinquencies and foreclosures have dropped since its inception, and the oversight of servicers provided by MHA programs has brought some improvement. Since 2009, delinquencies have dropped from 6.1 million to 2.7 million. Over 3 million home - owners were underwater as of December 31, down from 10.2 mil- lion in 2009. And as of December 31, foreclosures starts are at 59,700, a difference of slightly over 76 percent of 2009's 250,600. MHA helped 2.8 million home- owners during its time, with a focus on five guiding principles: • Improving accessibility to foreclosure alternative programs for homeowners experiencing hardship • Providing payment relief that meets the needs of homeown - ers based on their hardship • Becoming sustainable through solutions designed to resolve delinquency and improve ef- fectiveness long-term • Being transparent by ensuring that the processes are clear and understandable by all parties • Holding itself accountable by ensuring the appropriate level of oversight The Home Affordable Modification Program (HAMP), launched in spring 2009, began a total of 2,511,344 trial loan modifica - tions and 1,683,112 permanent mod- ifications. MHA's Q 4 results noted that homeowners who remain in HAMP without defaulting are less likely to default in the future. Many homeowners in delin - quency who were not eligible for HAMP assistance found alterna- tive solutions. Fifty-eight percent of those not eligible obtained alternative modification or other- wise resolved their delinquency. However, 23 percent were referred to foreclosure. In addition to offering pro - grams such as HAMP, MHA has compiled data on servicers so that they could better address the needs of homeowners. The MHA Servicer Assessment results for Q 4 2016 showed which major servicers require improvement, and whether the needed improve - ment is slight or substantial. Bank of America, JPMorgan Chase, Ocwen, Select Portfolio Servicing, and Wells Fargo were reported by MHA as only requiring minor improvement, and CitiMortgage is reported as requiring moderate improvement. However, MHA reported the need for substan - tial improvement at Nationstar Mortgage. MHA's results found a 4 percent rate of income calcula- tion errors within Nationstar mortgage, bringing the servicer's score down. The Hardest Hit Fund (HHF) dealt with state-by-state problems in the housing crisis, rather than the nationwide programs from MHA. HHF programs inter - act with MHA programs and have assisted more than 292,000 homeowners as of December 31. HHF programs did not end on December 31 but have been extended through 2020. Dodd-Frank—while well-intended—had inundated banks with costly and complicated regulations, "especially smaller banks."

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