Monday Morning Cup of Coffee: Trump shows he’s serious about deregulation

Monday Morning Cup of Coffee: Trump shows he’s serious about deregulation

Also, The New York Times goes negative on Quicken Loans

Monday Morning Cup of Coffee takes a look at news coming across HousingWire’s weekend desk, with more coverage to come on larger issues.

Politics continued to dominate the news cycle this weekend, with inauguration parties and protests following Donald Trump’s swearing in as POTUS.

Trump’s administration wasted no time making good on some of his campaign promises, with the Department of Housing and Urban Devlopment suspending the reduction of FHA Mortgage Insurance Premiums one hour after Trump was sworn in. The Obama administration had just announced the cut to the FHA premiums on Jan. 9.

But a more telling regulatory move was the one Trump took Friday night when he signed an executive order seeking to repeal the Affordable Care Act. An exectuve order doesn’t change the existing law, but does change the enforcement of the law, a course of action that could just as easily be applied to mortgage legislation like Dodd-Frank. From a CNN article:

It directs the secretary of health and human services, as well as other agencies, to interpret regulations as loosely as allowed to minimize the financial burden on individuals, insurers, health care providers and others.
It stressed that agencies can “waive, defer, grant exemptions from or delay implementation of any provision or requirement” of Obamacare that imposes a burden “to the maximum extent permitted by law.”

On Sunday, Politico reported that Senate Majority Leader Mitch McConell believes Republicans had the votes to confirm all of Trump’s cabinet, which includes Steven Mnuchin for Treasury Secretary and Ben Carson as HUD Secretary. The Senate has already confirmed James Mattis as defense secretary and John Kelly as homeland security secretary.

After lots of handwringing beforehand by people worried about his housing resume, Carson’s Senate confirmation hearing was mostly tame, but Mnuchin, a former executive at Goldman Sachs and chairman of OneWest Bank, formerly IndyMac, was not so lucky. Mnuchin was put through a blistering round of questions from Democrats, including a scolding speech from Sen. Elizabeth Warren, D-Mass.

Warren and other Democrats had solicited complaints from those who had been foreclosed on by OneWest and planned to have them testify during Mnuchin’s hearing, but Sen. Orrin Hatch blocked them from testifying. Mnuchin vigorously defended the actions of OneWest during the foreclosure crisis, noting that the bank tried to do loan modifications whenever possible and pointing out that he was not responsible for originating the loans.

Speaking of Mnuchin, I finally got to see The Accountant this weekend, a movie Mnuchin produced starring Ben Affleck. But Affleck shares the spotlight in the film with another key player that is hardly known outside the financial services industry: the Treasury department’s Financial Crimes Enforcement Network (FinCEN). The film features FinCEN agents solving high-profile cases involving drug cartels, money laundering and mafia bosses, which lines up well with the agency’s actual mission and accomplishments.

Bankers are intimately familiar with the agency, of course, which enforces rules under the Bank Secrecy Act, including the gathering of Suspicious Activity Reports. But your average American has never heard of them, and I felt a little like Buddy the Elf when he thinks he’s going to see Santa, shouting,  “I know him!!”

Just to recap, a former executive at Goldman Sachs and OneWest Bank is also a movie producer who just so happened to produce a thriller this year that involves the Treasury, which it now appears he will run in real life. Which actually sounds like a movie plot itself. Mnuchin’s company, RatPac-Dune Entertainment, also helped finance movies like Suicide Squad, Batman v. Superman: Dawn of Justice, The Conjuring 2 and Fantastic Beasts and Where to Find Them. No word yet on whether Mnuchin will also become a wizard and/or Batman.

Why did the New York Times run such a negative piece on Quicken Loans? The New York Times ran a profile on Saturday titled, Quicken Loans: The New Mortgage Machine, by Julie Creswell, which left me scratching my head. The article begins by citing some quirky examples of Quicken’s culture, but somehow makes them seem sinister.

A visit to the headquarters of Quicken Loans in downtown Detroit may seem like a trip to a place where “Glengarry Glen Ross” meets Seussville. But the whimsical, irreverent atmosphere sits atop a fast-growing business in a field — the selling of the American dream — that has changed drastically since an earlier generation of mortgage lenders propelled the economy to near collapse in 2008 by issuing risky and even fraudulent loans.

In case you didn’t see the movie, comparisons to Glengarry Glen Ross are far from positive. In fact, the whole paragaph is filled with negative connotations. Originating mortgages is equated with “selling the American Dream,” followed by a sentence conjuring up the ghost of the financial crisis where mortgage lenders “propelled the economy to near collapse” through loans that were not just “risky” but “fraudulent.”

The rest of the article is similarly written, with nonbanks consistently referred to as part of  “shadow banking.” Either the author is unfamiliar with the actual definition of shadow banking, or hasn’t paid attention to the increasing scrutiny the nondepository lenders are under. as demonstrated by the Community Home Lenders Association, here.

In describing Dan Gilbert, Quicken’s founder, the article follows any positive contributions he has made with negative asides. For instance, noting that Gilbert has revitalized downtown Detroit by locating not only Quicken Loans but also other businesses there, the article states,

“That sort of presence makes downtown Detroit today seem a bit like a company town, a sort of Quickenville. That’s because Quicken Loans is just one of more than 100 closely knit companies that is owned or controlled by Mr. Gilbert with a footprint in the area. Through his commercial real estate properties, Mr. Gilbert can decide which tenants fit into his vision for downtown Detroit, and which don’t.”

Quickenville? Was Creswell making a reference to Pottersville from It’s A Wonderful Life, where the greedy banker makes money off poor tenants? What a bizarre way to describe the wholesale investment in a town that no one else would touch, providing tens of thousands of jobs in the process.

Another description of Gilbert tries to make him seem irrational in his explanation of why his company was targeted by the Department of Justice for a false claims lawsuit in 2015. According to the article, Gilbert states: “You want to know what this case is about?” he said. “Somebody probably put up a whiteboard and said, ‘Here are the 10 largest F.H.A. lenders, now go and collect settlements from them, regardless of whether they did anything wrong.’”

I don’t know about the Department of Justice, but that scenario is completely in line with some of the recent revelations about another regulator — the Consumer Financial Protection Bureau. To anybody familiar with the CFPB’s enforcement style, that description is not at all off base.

Earnings season continues this week, with D.R. Horton, Fifth Third and BOK Financial reporting early in the week. Check back with HousingWire for all the details on companies in the mortgage finance space.

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