The 20 percent down payment requirement recently put forth by the FDIC as part of the definition of a qualified residential mortgage will never happen, said Rep. Barney Frank (D-Mass.) in a wide-ranging speech to credit union executives at the Great New England Credit Union Show in Boxborough this afternoon. He suggested that regulators were more likely to settle on a 10 percent down payment.
Frank also suggested that fears about the repeal of the mortgage interest deduction were overblown and that while there were still some Republicans lobbying for an outright abolishment of Fannie and Freddie, even within that party there was a split between those who favored pure privatization of the mortgage market and those who recognized the need for government involvement in order to preserve the 30-year mortgage.
When it comes to Fannie and Freddie reform, credit unions "can do a service" by thinking about what it would take to keep 30-year mortgages, and communicating their thoughts on that issue to their representatives, particularly on the Republican side of the aisle, Frank said.
Frank strongly defended his namesake financial reform bill, especially its impact on community lending institutions, saying that the bill was "the dog that didn’t bark with regard to the credit union movement."
He acknowledged that the changes to interchange fees have the potential to hit small banks’ bottom lines, and indicated his own willingness to delay implementation of the reforms. He also urged community banks and credit unions to direct their lobbying efforts to the Senate, saying that groups such as credit unions with strong roots in local communities were the strongest persuaders of Congresspeople.
But he rebuffed concerns about the Consumer Financial Protection Board. Frank suggested that from a credit union’s perspective the main thing the agency will bring "is regulation of your competitors," such as private mortgage brokers and pay day lenders. He said the point of the changes were to make "other people act like you," suggesting that if other financial institutions had underwritten to credit union standards the financial crisis would never have occurred.
Franks took several questions from the audience, in a wide-ranging discussion which touched on rising gold prices, foreign policy, and the need to reduce military expenditures, a topic on which Frank dwelt at length and which he indicated was one of his top priorities in the upcoming budget fight.
