The Housing Industrial Complex

8/13/2019 The Housing Industrial Complex

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The fun and challenge of coveringhousing and mortgage reform

Lorraine WoellertBloomberg NewsDecember 2013


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Real people homeowners and renters

Folks who make a living off those people

agents, lenders, settlement companies,

retailers, lobbyists Local and state governments taxers and

regulators, lobbyists

Wall Street lenders, securitizers, insurers,

investors, servicers, economists, lobbyists

Washington regulators, politicians, GSEs,

think tanks, advocacy groups, lobbyists


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MBS, RMBS, CLO, CDO, REMIC, TBA, QM, QRM,HAMP, HARP, PLS, ARM, MID, PMI, OMG!

Debt-to-income, ability-to-pay, loan-to-value

Monetary, fiscal and economic policy

Fannie v. Freddie v. Ginnie v. private label

HUD, FHFA, GSEs, FHA, CFPB, NEC, FDIC, FED

Mass-refis, g-fees, reps & warranties


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(no end of sources, people & stories)


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Homeowners, would-be buyers, renters,

communities, retirees

Civil rights and social justice groups who view

housing as a basic right:

National Fair Housing Alliance, Council of La Raza,National Low Housing Coalition, National Housing

Conference, state housing finance agencies

Consumer protection groups:

State consumer affairs divisions, attorneys general,

trial lawyers, U.S. PIRG, Consumer Federation ofAmerica, CFPB, National Community Reinvestment

Coalition, AARP


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Agents & brokers: National Association of Realtors, Zillow,Century 21, Sothebys, Berkshire-Hathaway, your localbrokerages and army of real estate agents, many of whomare local politicians and donors. Do not underestimate theinfluence of this group

Lenders: Mortgage Bankers Assoc. American Bankers

Assoc., credit union associations, financial services firms.Heed that note on influence above

Builders, contractors & labor: National Association ofHomebuilders, unions. Again, influence

Title & settlement companies, mortgage insurers,reinsurers: American Land Title Association, AIG and a

league of politically active small-town lawyers. Big-dollarfinancial companies youve never heard of down to the guywho runs City Hall

Appraisers, architects, landscapers, retailers: People whoread your paper and care about this stuff


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County, city and town governments rely on

property taxes to fund schools, infrastructure

Local and state judges oversee foreclosures

Local law enforcement handles evictions

States subsidize affordable housing through

housing finance agencies, which sell tax-

exempt bonds and administer tax credits

States oversee consumer protection and

insurance regulation


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Commercial banks lend money, service loans, securitizemortgage debt (package loans into bonds and sell them),trade and invest in mortgage bonds Financial ServicesRoundtable, SIFMA, American Securitization Forum

Private-label issuers do all of the above without help ofFannie, Freddie or Ginnie Redwood

Local and regional banks and credit unions make loans toconsumers. Most sell those loans to Fannie or Freddie.Some stay on the banks books (portfolio loans)

Mortgage insurers do what GSEs and FHA do, only withoutgovernment support Genworth, Essent

Servicers send bills, collect payments and manageforeclosure process. Some also manage borrowersescrow accounts to pay property taxes and insurance Ocwen, IBM, commercial banks

Investors buy mortgages pensions, mutual funds,foreign governments, hedge funds, banks, you and me

Economists!


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Regulators and enforcement Fed, CFTC, FDIC,OCC, NCUA, CFPB, HUD, SEC, DOJ, IRS, Treasury,oversight committees

Politicians and policymakers banking, tax andjudiciary committees, White House

GSEs government-sponsored entities FannieMae and Freddie Mac, overseen by the FederalHousing Finance Agency (FHFA)

Ginnie Mae a cousin of Fannie and Freddie thatpools FHA, VA and USDA loans

Lobbyists, lobbyists, lobbyists. Lobbyists.


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(aka thefine print. Dont freak out)


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MBS, RMBS = TYPES OF BONDS: mortgage-backed security, residential mortgage-backed security.Mortgage bonds are pools of home loans sold to investors (securitized)

CDO, CLO, PLS= TYPES OF MBS = TYPES OF BONDS: collateralized debt obligation, collateralized loanobligation, privatize-label security. All make it easier to invest in mortgage debt. More investors means

more money floating around means more homebuyers getting loans means more homes sold. CLOs, CDOs

and their exotic offspring also are known as derivatives

REMIC, REIT= WAYS TO BUY AND SELL MBS: real-estate investment conduit and real-estate investmenttrust. Offer tax benefits to investors

TBA= SPECIAL WAY TO BUY AND SELL MBS: to-be-announced market, where Wall Street can tradeFannie, Freddie and Ginnie bonds that dont actually exist yet

QM, QRM= SAFE MORTGAGES: qualified mortgage and qualified residential mortgage. Dodd-Frank Actdefinitions of low-risk home loans. QRM rule meant to give lenders and securitizers incentive to keep skinin the game (share risk) or face lawsuits and regulators wrath

HAMP, HARP= AID TO HOMEOWNERS: Home Affordable Modification Program, Home AffordableRefinance Program. Government programs to help troubled borrowers into easier-to-pay loans and help

underwater homeowners get lower interest rates

ARM, option-ARM = TYPES OF MORTGAGE: adjustable-rate mortgage as opposed to a fixed-rate, 30- or

15-year mortgage. Not necessarily evil. The more exotic option-ARM is riskier because it gives borrowersthe option of paying less every month

Conventional v. Jumbo= TYPES OF MORTGAGE: Conventional mortgages are backed by Fannie, Freddieor Ginnie, which cap the size of loans they insure. Jumbos are high-dollar mortgages the agencies wont

touch. Jumbos are securitized through PLS or held on portfolio

OMG= OMG

Debt-to-income, ability-to-pay, loan-to-value: Ways to gauge a borrowers risk of default


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Here comes Mel Watt! Will mass-refi follow?

Which GSE reform bill will win out? Will any?What if nothing happens?

Whats happening as Washingtons role shrinks?

Whos making money on housing now? How?

Politics not as simple as left-right, GOP-Dem,urban-rural

Its not just about single-family ownership

Foreclosure mess is NOT over! Lobbying is just gearing up

This story is LOCAL

The Housing Industrial Complex

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