THE Community Mortgage Lenders of America Again Calls Out The Urban Institute For Corporate-Backed Lobbying

Ed Wallace Advocacy

WASHINGTON, D.C. – The Urban Institute, once a pre-eminent Think Tank launched by the Johnson Administration to serve the needs of our cities, has increasingly devolved into a corporate-backed lobby that serves its big bank and big finance clients to the detriment of our nation’s urban populations.  
 
As part of its big finance agenda, it has repeatedly maligned the business models of the independent mortgage banks that have stepped in to lend in the absence of larger lending institutions, many of which paid massive fines in the aftermath of the Great Recession.  In 2018, a fellow there said nonbank lenders were “pro-cyclical,” and presented heightened oversight challenges to the US government.  When asked by two trade groups for data backing these public assertions, the organization clammed up and refused to respond.  This is not the hallmark of a data-based Think Tank; it’s the tactic of a corporate lobby organization.  In addition, these quotes came from a fellow who played a key role in the development and marketing of the toxic CDOs and CDO-squareds that decimated the economy and families in the Great Recession.
 
Now comes a new “report,” from The Urban Institute that says lenders that have stepped up to serve FHA families are “thinly capitalized,” “more likely to fail,” and “create significant counterparty risk” to Ginnie Mae.  This report is authored by the creator of the toxic CDOs and another fellow who was an author of the zero-capital regimen of the GSEs, a flawed policy that has contributed directly to a housing market performing below expectations for almost a decade.  
 
“It is the height of hypocrisy that a fellow who directly endorsed zero capital for two of the world’s large financial organizations to call community lenders ‘thinly capitalized’ now when this trope has been debunked by The Community Mortgage Lenders of America, the Community Home Lenders Association, and the Mortgage Bankers Association,” said Ed Wallace, Executive Director of CMLA. As three trade groups have noted, independent mortgage bankers have appropriate capital given their business models, lack of exposure to taxpayer-backed deposit insurance, and performance metrics. 
 
The CMLA members have traditionally served those Americans not able to get mortgages from large financial firms and also have been traditionally focused on urban and rural communities. These lenders have been in business for decades and survived the Great Recession through careful underwriting and close attention to detail.  

In addition, recently in the National Mortgage News, the current head of Ginnie Mae noted that nonbanks bring benefits to the lending market today:
 
“I think it’s probably important to highlight what the benefits of the nonbanks are in our market,’ she added. ‘Obviously there’s a financial concern in that we want to make sure that there’s liquidity, but what [they do] offer for Ginnie is we have a more diversified issuer base.’”
 
Ms. Kasper also noted that:
 
“‘In terms of key conclusions, I think one thing that stood out to me first and foremost was that the current liquidity situation is healthy,’ said Kasper.”
 
A recent MBA white paper on IMBs noted that “today’s IMBs operate in a far more regulated environment, with routine exams, data reporting, and coordination among the states and with federal regulators.”  The same report states that “the IMB business model is time tested for over 140 years.”
 
“Community lenders think that the Urban Institute needs to examine its direction and lack of data to back its big-finance assertions,” said Ed Wallace, Executive Director of CMLA. “It may be time for new leadership there to return the organization to its true roots.”

Ed WallaceTHE Community Mortgage Lenders of America Again Calls Out The Urban Institute For Corporate-Backed Lobbying