Regular readers know that your humble blogger has called for building this database since before the beginning of the financial crisis as it is also necessary to support the residential mortgage-backed securities industry (everything from covered bonds to securitizations). The Federal Housing Finance Agency has also called for building this database as it sees its future in having oversight over the database.
Six years after the foreclosure crisis began in earnest, as former Congressional Oversight Panel vice chair and current AFL-CIO general counsel Damon Silvers put it, “it’s impossible to get reliable, comprehensive information on foreclosures.” ...Or on performing mortgages.
There are four separate widely followed private foreclosure tracking services — Corelogic, LPS, RealtyTrac, and the Mortgage Banker’s Association National Delinquency Survey. Each has problems, and none is comprehensive.
There are also government sources for foreclosures. The Office of the Comptroller of the Currency, which regulates national banks, has a widely cited Mortgage Metric Report. The data for that report comes from the big mortgage services, and it is “rigorously reviewed”, according to Bryan Hubbard, spokesman for the OCC. It’s considered good data, but it covers only 50 to 60 percent of the market, the part controlled by services regulated by the OCC.
The FHFA tracks some limited data around Fannie and Freddie loans, and the VA and FHA track some data around loans guaranteed by those agencies. But like the private data services, none of these foreclosure sources are comprehensive.Please recall that Phillip Swagel and the Paulson Treasury team called for the creation of this database at the start of the mortgage crisis.
This causes significant problems for policymakers (and thus homeowners).
As Silvers put it, “If you do x, whatever x, refis, principal write-downs, interest subsidy programs, how much is it going to cost?”
The lack of data is impacting the key policy question over debt relief for homeowners.
Currently, there are proposals outstanding for Fannie and Freddie to write down mortgage principals for homeowners that are underwater, or owe more on their mortgage than their home is worth. Liberal groups are seeking to have the official in charge of these two entities, acting FHFA chief Ed Demarco, fired for his intransigence in this policy area.
There are also proposals for municipalities to seize performing underwater mortgages through eminent domain and restructure and resell them.
A key question in these disputes is how these proposals would impact foreclosures. And because of the lack of data, we can only guess.
“If you write up some sort of protocol for doing something with mortgages, the question can’t really be answered vigorously under the current data regime. And the consequence is actually that it produces a reluctance to act. The lack of good data has seriously contributed to the inability to make good policy in this area,” says Silvers.Please re-read the highlighted text as Mr. Silvers nicely summarizes what your humble blogger has been saying not just about mortgages, but also about the banks.
A lack of good data makes it virtually impossible to address the problems.
The problem of foreclosure data has been understood for years.
In April, 2009, Elizabeth Warren’s Congressional Oversight Panel released a report detailing problems in this space and citing a “failure of regulatory intelligence gathering and analysis.”
Dodd-Frank even included a provision for the Consumer Financial Protection Bureau and the Department of Housing and Urban Development to create a national database of foreclosures. The bill, however, did not provide the necessary funding mechanism for HUD to do so, nor did it include a deadline.
The next Congress, not surprisingly, has also failed to appropriate the funds. According to Brian Sullivan at HUD, the agency also lacks “statutory authority to compel the reporting to HUD of information necessary to compile localized loan performance data.”
The Consumer Financial Protection Bureau, which has a strong research component, has partially stepped into the breach. HUD is working with the Consumer Financial Protection Bureau to begin “exploring and evaluating options for creating the database,” according to Pete Carroll, CFPB’s assistant director of mortgage markets. “In order to best understand what is going on in the mortgage marketplace, regulators need solid loan performance data.”Please re-read the highlighted text as Mr. Carroll confirms what I have been saying about the need for loan performance data.
But there is no deadline or dedicated congressional funding for the joint HUD-CFPB project, and other priorities that are funded take precedence. There are no congressional hearings scheduled over this crucial element of Dodd-Frank, nor is there congressional pressure to look into whether the regulators can even peer into the housing market with precision. And should Mitt Romney win and alter the direction of the CFPB, or should the CFPB lose a funding battle in Congress, the creation of a database will stop at the exploration stage.A victory for Wall Street's Opacity Protection Team.
The lack of data speaks to the “absolutely insane way we do housing policy,” according to Georgetown law professor Adam Levitin. The problems in this area are exacerbated by a mix of failed leadership and bureaucratic design.What I refer to as the financial-academic-regulatory complex (FARC).
“What is our housing policy? We don’t have one, because no one’s responsible for it. Treasury and the Fed are not housing experts, but they seem to be as involved as anyone. We don’t have a housing czar. The system worked fine before 2008, because housing policy was very simple. It was, increase homeownership. Now that we’re more sophisticated about housing policy, we have a problem because no one’s in charge of it.”...
As Levitin puts it, “the lack of accountability for housing policy is especially galling in 2012 because for years we’ve had people saying ‘housing is at the center of our economic troubles,’ and yet the administration has done nothing to produce a housing policy apparatus. You can see this in where they put HAMP, they put this in Treasury. Prior to 2008, Treasury had zero experience in housing. You see it with the fact that Demarco is the head of FHFA. If I were the President and I knew that housing was our number one economic policy problem, I’d want my guy running that agency.”
In the housing and foreclosure space, Levitin notes, there is no leadership: “No one wants the football.” That’s why the government doesn’t have adequate data on the characteristics of the foreclosure epidemic. You can’t manage what you can’t measure. So if you want to avoid managing a problem, just don’t measure it.If the database existed, the problem would be addressed.
Addressing the problem would reduce the power of FARC. As a result, FARC has an incentive to act as a barrier to the creation of the database and solving the problem.