With a new man in the White House and an evenly split Congress, where will housing policy go in the coming year? We talked to some policy experts, like Nicolas Retsinas of the Harvard University Joint Center for Housing Studies and Congressman Richard Baker, about the big issues on top of the agenda.
DURING HIS CONFIRMATION HEARINGS TWO MONTHS AGO, Department of Housing and Urban Development (HUD) Secretary Melquiades R. Martinez promised to be "very active" at the helm of the massive federal housing agency--pledging to expand its already vast reach across the American landscape.
But extending HUD's scope may be a tall order for the Cuban emigre, following as he does in the footsteps of Andrew Cuomo--arguably one of the highest-profile housing secretaries in the department's 35-year history.
Adding to the challenge for Martinez is the current congressional climate--with party power balanced like an egg at the equinox, so one wonders what will happen at the rise of the first ill wind.
Washington watchers say that in this fragile environment, more power will shift from the legislative to the regulatory arms of government.
"Clearly, agencies like the [Office of the] Comptroller of the Currency [OCC], the Office of Thrift Supervision [OTS], the FDIC [Federal Deposit Insurance Corporation], will have the most significant impact," says Nicolas Retsinas, who served as assistant secretary for housing and federal housing commissioner at HUD during some of the clinton years. He now directs Harvard University's Joint Center for Housing Studies in Boston.
In an interview with Mortgage Banking, Retsinas said community reinvestment is one issue where there will not be legislative action pro or con, given the split. "There's not enough leverage on either side," he reasons. As a result, whatever activity takes place would be at the regulatory level.
"Just look at CRA [the Community Reinvestment Act] in recent years. It wasn't legislative initiatives that promoted it, it was regulatory initiatives," Retsinas says.
In January, the Harvard Joint Center for Housing Studies issued its final report on CRA, a study mandated by Congress through the U.S. Treasury Department as part of the financial services modernization legislation (the GrammLeach-Bliley Act of 1999) Harvard and the Brookings Institution, Washington, D.C., co-authored the document.
Harvard will continue investigating the impact of community reinvestment requirements through the fall under a grant from the Ford Foundation, according to Retsinas, also a former director of the OTS and board member of FDIC, the
Federal Housing Finance Board and the Neighborhood Reinvestment Corporation (NRC).
In the recent CRA report, the Harvard center determined that the 23-year-old federal law promoting community reinvestment had indeed "made a difference."
"You can make your own judgments about whether the difference was worth what it cost to administer the [CRA] program and whether there might have been a more efficient way to accomplish the same goals," Retsinas says, but the facts are that CRA clearly affected lending patterns in the United States--especially in the 1990s he maintains.
Clearly, a robust economy and an active bank merger market in the 1990s had as much to do with the impact of CRA as did the law itself. So, too, did the affordable housing goals of the government-sponsored enterprises (GSEs), as well as more industry emphasis on fair lending and "the imagination of some mortgage companies," says Retsinas.
On the last reference, he cites "companies like Chase or Citigroup, looking for alternative lines of business with healthier margins." These new lines often are found in the subprime arena, where some borrowers fall within the CRA's reach.
Retsinas says he hopes lawmakers will demonstrate sufficient bipartisanship to "really look at the question of how appropriate and applicable CRA is in the new world of financial services." He is personally encouraged by the changes he has seen over the years in bankers' attitudes toward community reinvestment.
"When I got involved in banking regulatory matters, I found lenders privately would whine about CRA,' says Retsinas. "Now they are more likely to talk about the great CRA programs they have." He speculates that this change of heart may be a key reason why CRA opponents are not getting as much traction.
Perhaps for that reason, Retsinas regards CRA law as immune from tinkering--at least for now. "There appears to be not a general interest in reawakening the debate either in extending CRA to other financial service entities or cutting it back," says Retsinas. The exception might be in the continuing efforts of Senator Phil Gramm (R-Texas), who chairs the potent Senate Committee on Banking, Housing and Urban Affairs and is a resolute opponent of the law.
The Senator Gramm wild card
In an outline of his committee's housing agenda for the new Congress, Gramm indicated that members would probably lie low on housing legislation, preferring to spend the sear acting in an oversight capacity However, Gramm did forecast "a major housing bill in 2002." The Texas senator expressed pride in the bill passed at the end of the last Congress, contaming what Gramm deemed "a lot of good things."
According to Gramm, the newly configured banking committee will conduct "a more comprehensive review of our housing authorities to make sure that they...