Final Comments On The LLPA Changes

I hate it when housing issues get politicized. That doesn’t mean I won’t state my opinions, but when issues like the LLPA changes get turned into a right versus left debate it makes my stomach turn. In the case of this policy change I stated my concern about the precedent of making this set of changes. I opposed Director Calabria’s policy when I thought he was on a path that would have harmed the GSE’s critical role and in similar fashion I did the same here with Director Thompson.

As one senior executive stated to me, “ I worry that the result of the Supreme Court rulings on both the CFPB and FHFA resulted in politicizing these positions”. By default there is some truth to this. The head of the both agencies serve at the will of the President. So Trump had Kraninger and Calabria, while Biden has Chopra and Thompson. I think for those of us in housing, we should simply worry about any tinkering with the institutions as administrations change as these moves may reflect differing objectives and that could increase risk to the system.

But make no mistake about my view here. While I oppose this policy on precedent concerns, I supported Director Thompson’s confirmation. And overall she is doing a great job at the role. Also, let’s remember that we have many issues facing our industry. Buy backs, increased talk of non bank regulatory oversite, Chopra’s warnings to industry in a variety of policy areas, liquidity, profitability, the Feds next moves, and more. This is but one item.

I also want to emphasize what others have said already. I wrote about my concerns about this policy in a Housing Wire op-ed back in February. The media provocation recently (I think) came from the NY Post story which snowballed across the conservative media primarily. By the time I got contacted by Newsmax I knew this had gone too far.

Look, there are 81 cells in the LLPA matrix. It’s not like any lender has 81 different prices for a borrower. The lenders average price by LTV and make it up on delivery through their capital markets teams. The borrowers really won’t know the difference in any significant way as a result of this.

So, why am I opposed to this? Simply because of the forest through the trees analogy. Looking at the “trees” you might say that there will be minimum impact. In fact the 40% DTI cap is the biggest issue here, not the fees themselves. Second home fees and 2-4’s as well as cash out refi fees are a greater concern to industry. But I looked at the “forest” implications, not the trees, and what I see is a future with an array of FHFA Directors over the years to come whipsawing these two institutions in very unhealthy ways based on the party in power.

The GSE’s are far too critical to housing and for the first time I am beginning to lean into the idea that perhaps recap and release without congressional reform may be a superior outcome to what seems to me to be a more politicized environment of over-site of these two very important companies.

In the end, I realize this issue is over, and I do not want to feed the political response any further. I just ask my housing brethren to help by insuring that we maintain the integrity of these two very important institutions.

Now, back to work.