IN OCTOBER, CLEVELAND-BASED AMCO DRAMATICALLY beefed up its board of directors, which now includes two former cabinet secretaries and an ex-Federal Housing Administration (FHA) commissioner. Mortgage Banking had a chance to interview all three board members to discuss current housing policy issues. In this third interview in the series, Andrew M. Cuomo, former secretary of the Department of Housing and Urban Development (HUD), talks about his involvement with housing policy over the past two decades. "Most of my professional career has been devoted to housing issues, particularly those that impact the fairness of the system to the under-privileged," Cuomo said.
Cuomo said the future of the housing industry will be marked by some threats and challenges, especially on the appraisal side. "Perhaps the greatest threat to the American housing market is the overvaluation of the collateral securing trillions of dollars of first-mortgage and home-equity loans," he said. "In my years at HUD, we tried to deal with this problem primarily through the regulation of appraisers. Through my involvement with AMCO, I hope to further positively impact the threat of overvaluation and the protection of the underlying securities within the housing finance industry."
Another challenge Cuomo identified involves the increased importance of accurate appraisals as lenders and brokers dive deeper into the subprime sector. "Subprime lending is a growing market for the financial industry. Overvalued appraisals are harmful to both borrowers and lenders, but especially so in the subprime lending market, where the loans are always riskier. Lenders anticipate a certain number of defaults and foreclosures in subprime lending. With higher interest rates and an economic downturn, the number of defaults and foreclosures will climb. Overvalued appraisals on these loans will make a bad situation even worse for both lenders and borrowers," Cuomo noted.
One of the top housing policy issues in Washington right now at the start of the new Congress is how to approach regulatory reform of the government-sponsored enterprises (GSEs). We asked Cuomo for his thoughts on this debate.
"GSEs are a very important to the secondary [market] finance system," Cuomo said. "They are part of a bargain in which they receive special benefits in return for creating liquidity in the market and affordable housing for low-income families. It's my belief they need to do more in the...