Recently incoming Federal Housing Administration Commissioner Brian Montgomery refers to a “bright line” when discussing FHA lending programs to the country’s consumers.
Bottom line: He laments that it is, well, not bright. In fact, he stresses that transparency and certainty surrounding FHA loans has been murky and misguided at best over the past several years. That has in turn, he stresses, driven high numbers of prominent lenders out of the government loan market.
What Montgomery and other regulators say is that reforms instituted under the previous presidential administration “went too far” in their efforts to curb illegal lending practices. As noted in one recent national media piece, many key lenders have exited the market after being accused “of violating the False Claims Act by knowingly originating and underwriting mortgages that did not meet FHA standards.”
Such a charge has not gone down well with the heads of long-time and big-name lenders like JPMorgan Chase and Bank of America. Jamie Dimon, CEO of the former entity, says that unclear and unreasonable FCA settlements flatly minimized incentives for banks to participate in FHA programs.
In fact, Dimon says, the billions of dollars in penalties assessed against alleged lending fraud “wiped out a decade of FHA profitability.”
Montgomery and other government regulators are now espousing a softer and reined-in line, stating that prime lenders can now drop some of their fears and return with confidence to the market.
Montgomery concedes that lenders “want greater certainty around what’s the bright line,” and he responds that firmer and more comforting guidance is forthcoming.