Wall Street’s unexpected allies: How groups who “represent the poor” quietly push deregulation

[DonViejo]

You might expect banks to agitate for exemptions to new mortgage rules – but Habitat for Humanity?

DAVID DAYEN

It’s hard enough to regulate Wall Street’s activities with the usual band of well-paid lobbyists and lawyers attacking every provision. But imagine what would happen if organizations purporting to represent the poor and disenfranchised swarmed Capitol Hill and demanded deregulation.

Last week saw two such incidents, both focused on the Consumer Financial Protection Bureau’s new mortgage rules, based on the simple idea that lenders should only offer mortgages to borrowers who can afford the terms. The rule sets standards for “qualified mortgages,” excluding risky products like “interest only” loans (where the monthly payment only covers the accrued interest) or loans with excessive upfront costs. Additionally, lenders must judge that the borrower has the ability to repay, based on income and other monthly bills.

Lenders can still make riskier loans, but they would be on the hook for a lawsuit if the borrower defaulted. Qualified mortgages get a safe harbor, both for the lender and whoever they might sell the loan to on the secondary mortgage market. The basic idea is to prevent a glut of dangerous mortgages in the marketplace, like the ones that collapsed after the housing bubble and led to the financial crisis.

The rules went into effect Jan. 10. The sky has not fallen and people are still getting loans, but mortgage bankers and their allies in Washington have been screaming about how the rules will inhibit lending, despite the fact that over 87 percent of all mortgages originated in 2012 would have met the qualified mortgage standard, and the other mortgages aren’t even banned (it’s more that the banks don’t want nonqualified mortgages on their books, and if the loans are that toxic, maybe they shouldn’t be sold in the first place).

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http://www.salon.com/2014/01/22/wall_street%E2%80%99s_lamest_enemies_meet_groups_who_represent_the_poor_%E2%80%93_but_push_deregulation/