With Biden’s FHA nominee in limbo, mortgage market grows restless

WASHINGTON — President Biden’s nominee to head the Federal Housing Administration is stuck in limbo as the Senate battles competing priorities, frustrating many in the mortgage industry who are concerned about a lack of leadership at a critical juncture for the agency.

Julia Gordon — currently president of the National Community Stabilization Trust, a nonprofit that promotes neighborhood revitalization and housing affordability — was nominated in June as FHA commissioner. Her nomination hearing before the Senate Banking Committee was held in August.

Industry representatives and analysts say it is crucial for the FHA to have a Senate-confirmed leader in place with the housing market still shaky due to the COVID-19 pandemic. Delinquency rates for FHA loans are still above pre-pandemic levels, and most government-backed forbearance plans for borrowers affected by the crisis expire by year-end.

Yet it is not clear that the full Senate will vote on Gordon’s by then as lawmakers scramble to pass the Biden administration’s social spending bill and raise the debt ceiling.

“It’s essential that it happen before the end of the year,” said Scott Olson, executive director of the Community Home Lenders Association.

“Things are moving quickly in the business, and FHA runs a real-world program, and so we need leadership,” he said. “There’s a lot of issues that need to be addressed, and so it is a high priority, and we need to fit it on the schedule.”

At her nomination , Julia Gordon said the most important thing for FHA to focus on would be to “prevent more families from losing their homes” once the government-mandated mortgage forbearance winds down.

At her nomination , Julia Gordon said the most important thing for FHA to focus on would be to “prevent more families from losing their homes” once the government-mandated mortgage forbearance winds down.

Bloomberg News

Yet Gordon’s confirmation bid has been contentious regardless of Congress having a full plate.

While she has wide-ranging support from both the mortgage industry and community groups, which have all cited her extensive experience in the housing space, Republicans have urged Biden to pull her nomination because of previous comments she made that they say are overly critical of law enforcement.

With the Senate split evenly among Democrats and Republicans, Gordon cannot afford to lose any Democratic support. (Vice President Kamala Harris could cast a tie-breaking vote in her favor.)

The Senate Banking Committee was split along party lines in advancing her nomination. That tie means Majority Leader Chuck Schumer, D-N.Y., must take an extra procedural step — filing a petition to discharge the nomination out of committee — before the full Senate can vote on her confirmation.

“I think the issue for her is that it is a 50-50 Senate. There is not a lot of political incentive for Republicans to make a confirmation of any Biden nominee all that easy,” said Ed Mills, a policy analyst with Raymond James.

Sen. Pat Toomey, R-Pa, the ranking member of the Senate Banking Committee, took particular issue with a letter Gordon wrote last year in her capacity as NCST president after the police killing of George Floyd, in which she said police violence stemmed “from flawed and biased systems that require structural change.”

The lack of Republican support in committee for her nomination plus a jam-packed agenda in the Senate, has made confirming Biden’s nominees a lengthy process, said Bill Kilmer, senior vice president for legislative and political affairs at the Mortgage Bankers Association. The trade group supports Gordon’s nomination.

“It’s an important position and obviously one of the key regulatory positions for the industry, so we’d love to have a confirmed assistant secretary for housing and FHA commissioner as soon as possible, obviously, but we get it,” he said. “There’s a backlog of executive branch nominations … that makes floor time tough to come by and at a premium, as the leadership’s balancing those kinds of things.”

While most ultimately believe that Gordon will be confirmed, analysts say the tectonic movements in the mortgage market spurred by the pandemic necessitate quicker action by Congress.

“We’re not talking about a corner of the government where everything is ho hum, and there’s nothing to worry about,” said Isaac Boltansky, the director of policy research at BTIG. “It’s uniquely frustrating that this agency that has real work to do to improve the health of its book doesn’t have a Senate-confirmed head.”

High on the FHA docket for a Senate-confirmed commissioner would likely be taking steps to prevent avoidable foreclosures, especially as borrowers exit forbearance plans.

At her nomination hearing in August, Gordon said the most important thing for FHA to focus on immediately would be to “prevent more families from losing their homes” once the government-mandated mortgage forbearance winds down for most borrowers by the end of the year.

“First and foremost is going to be ensuring the health of the book of business and advancing positive outcomes for FHA borrowers,” said Boltansky. “There is still work to be done there, especially as forbearance plans have rolled off, and I think that that is going to be the number one priority of anyone who sits in that chair.”

FHA is also in the middle of an ambitious effort to modernize its program and build out its IT capabilities, and is considering updates to its servicing program, said Kilmer.

Others also hope that FHA will lower mortgage insurance premiums and examine its life of loan premium policy, which requires that borrowers pay annual premiums for government insurance over the entire term of a loan.

The Biden administration has pledged to advance affordable housing and has included significant resources in its spending package to that end. But not having a leader at the government agency dedicated to serving first-time homebuyers could pose an obstacle to the White House’s own goals, said Mills.

“You look at the reconciliation bill, and there’s $150 billion in reconciliation under the most recent framework for housing,” he said. “That’s a historic investment in housing, and to make a potentially historic investment in housing and not have someone who leads up the FHA would be a significant missed opportunity for the Biden administration.”

While the Department of Housing and Urban Development had said in January that Janet Golrick was serving as acting FHA commissioner, Lopa Kolluri, principal deputy assistant secretary for HUD’s Office of Housing and the FHA, appears to have taken on the FHA commissioner duties.

HUD did not respond to questions about the acting FHA commissioner position.

While FHA has capable career staff, having a permanent, Senate-confirmed director is ultimately ideal, said Kilmer.

“You can’t make some of these decisions with the same finality if you’re still working with acting folks,” he said.

For some, the inaction on Gordon’s nomination underscores a larger frustration with the politics around nominations.

“Julia Gordon is not only eminently qualified, she is perhaps overly qualified for this role and should have been confirmed already,” said Boltansky. “It’s seldom that you have someone who is as deeply knowledgeable and well respected as her willing to serve at this junction in their career, and the fact that we are in a state of limbo is deeply concerning.”





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