The Dodd- Frank Bill has laid out a pathway for future operations in the financial services arena.  However, the road has not yet been paved.  The job of laying the pavement has been left to individual industry regulators who had 270 days from the date of passage to develop, write, publish, submit for comment and issue as final the regulation which will govern our business for the foreseeable future. That put regulators on an April deadline.

SURPRISE! Regulators aren't ready. How could we honestly expect regulators to be ready?

The housing finance mechanism is broken. The Federal government has Fannie and Freddie on life support. Seems like it might difficult for regulators to apply and implement new rules without a clear indication of how the housing finance mechanism will operate once the GSEs are reformed. So it comes as no surprise, in the absence of GSE reform, that regulators would pull the emergency chute on the implementation date of SOME of the regs outlined in the Dodd-Frank Wall Street Reform Bill.

The details are a little vague and therefore plenty of unanswered questions, but something is up in Washington!

WSJ: US Mortgage Rules Delayed In Regulator Spat
By Alan Zibel and Victoria McGrane 
WASHINGTON (Dow Jones)--The crafting of new standards for mortgage lending has been delayed amid a clash among top U.S. regulators on whether to attach protections for homeowners on the verge of foreclosure.

The holdup is doing little to help the beleaguered market for mortgage-backed securities, which is waiting for the rules. It's also an indication that the implementation of the Dodd-Frank financial overhaul could be messy as a diverse set of regulators try to reach consensus on numerous rules. 

At issue are rules dictating which loans should be exempt from the law's so-called risk-retention requirement, which says issuers of mortgage-backed securities must hold on to 5% of the risk. Lawmakers included the provision to avoid a repeat of the housing collapse by making lenders more cautious, since they now stand to lose if a loan goes bad. Previously, mortgage lenders passed the risk to other investors. 

Officials set a tentative goal of completing a proposal by the end of 2010, but the spat has contributed to a delay, according to people familiar with the negotiations. The Dodd-Frank financial-overhaul law mandates regulators finalize the rule by April. 

Six federal agencies must sign off on the proposal before it is published for comment. One of those--the Federal Deposit Insurance Corp.--has been insisting that the risk rules also contain new standards for mortgage-servicing companies, which collect mortgage payments and distribute them to investors.

Other regulators agree on the need for such regulations, but believe it's better to tackle them through a separate rule or possibly legislation. They are concerned the FDIC's approach wouldn't cover all mortgages. They also say it is unclear whether the risk-retention rules established by the Dodd-Frank law gave  regulators the legal authority to impose standards on mortgage servicers. 

Industry officials are pressing for a delay. Defining what kind of mortgages are deemed safe, and therefore exempt from risk-retention requirements, is complicated enough and should not be mixed with the servicing standards, said  Paul Leonard, vice president of government affairs at the Housing Policy Council, a mortgage industry group.      "There should be a discussion on how you look at servicing standards and what 
they should be," he said. "We think they should be done separately and take a 
little more time to do it." 

Industry groups also say a move by regulators to include servicing standards could be challenged. "There's certainly serious concern that this would not be in compliance with the legislative intent of the Dodd-Frank Act," said Tom Deutsch,  executive director of the American Securitization Forum, which represents the mortgage securities industry.

The FDIC has the support of some Democratic lawmakers and a number of consumer groups, economists and liberal activists. Supporters argue that servicing standards are critical to fixing the housing market and that the 
foreclosure mess is too dire to wait on the federal rule-making process or, even  worse, Congress. 

"We needed this three years ago; we needed it 20 years ago," said Alys Cohen, a staff attorney with the National Consumer Law Center, a liberal consumer group. 

Including standards in the Dodd-Frank mortgage rules guarantees they will be in place by April, "which is lightening speed by federal rule-making standards." 

The FDIC published a legal memo last month saying that servicing standards are "clearly permitted" under the risk-retention rules. Andrew Gray, an FDIC  spokesman, said Dodd-Frank asked regulators to "help ensure strong underwriting  and a safe and stable securitization market, and the FDIC strongly believes that  servicing standards are a critical part of this effort." 

The need for such standards became apparent, officials say, after revelations in recent months that lenders cut corners when processing foreclosure cases, using so-called "robo-signers" who signed thousands of court documents without reading them. Regulators from numerous federal agencies have completed a review of the mortgage-servicing system. That review has informed regulators' discussions about what fixes are needed, according to people familiar with the matter. 

Among the guidelines under discussion: requiring that mortgage servicers set a single point of contact--a person or phone number--for delinquent homeowners.  Mortgage servicers also could be required to disclose to investors whether they own any interest in the loans they service, such as a home-equity loan. 


For mortgage bankers this is a big deal. For originators this is a big deal. For consumers this is a big deal.  Why? The added costs for banks to originate home loans will surely be passed down the supply chain through smaller mortgage bankers and brokers all the way to the consumer.

READ MORE: Proposed Risk Retention Reform Affects Banker and Broker Loan Pricing

READ MORE: Pending Risk Retention Guidelines Create More Confusion in Mortgage Industry

Noticeably absent from the above story is a comment on the implementation of originator compensation reform, a reg that MND feels should be delayed.  A sentiment the MBA shares with us. Without an official press release providing more details, it is unclear exactly what sections of the Dodd-Frank bill are being delayed. But this definitely opens the door for the mortgage business to focus on implementing one reform at a time, in order of importance! GSE REFORM = #1 PRIORITY. Attempting to write any more rules before then sounds a lot like putting the cart before the horse.