A Measure to Ease Mortgage Rules? Not So Fast, Critics Say.

By Jeffrey H. Birnbaum
Tuesday, March 4, 2008

The housing market has been in meltdown largely because home buyers too quickly snatched up mortgages they could not afford and lenders were too eager to sell those mortgages to them. As a result, the last thing anyone would want is to ease government regulation of mortgage lending.

Except, maybe, if you're a mortgage broker.

The National Association of Mortgage Brokers, in fact, succeeded in quietly doing some deregulating in a bill that passed the House last year. Authored and co-sponsored by one of the industry's champions, Rep. Gary G. Miller (R-Calif.), the provision would end the requirement that mortgage brokers be audited annually in order to deal in mortgages insured by the Federal Housing Administration (FHA).

Miller represents part of Orange County, which is to mortgage-related industries what Connecticut is to insurance companies. Ditech, for example, is located in the county (though it's not in Miller's district, his office says).

The measure, which is part of a larger bill that would overhaul the FHA, is opposed by the Bush administration, the inspector general of the Department of Housing and Urban Development and a list of major business organizations, including the Mortgage Bankers Association, the American Institute of Certified Public Accountants and the American Bankers Association.

These opponents argue that the provision would put the FHA and the loans it insures at unnecessary risk. Audits are the only way, they say, that the government can be sure that the loans meet the agency's standards and that certain mortgage brokers are financially sound enough to weather the kind of reversal that the housing market is now experiencing.

In late January, the business groups that are against the provision wrote to Congress to summarize their view. "At a time of rising defaults, it is critical to both FHA and its customers that adequate supervisory processes remain in place," the letter states. "These audits protect not only the safety and soundness of FHA, but homebuyers as well."

To be fair, self-interest is motivating at least part of this opposition. One group pushing hard to defeat the Miller provision is the Affordable Housing Association of Certified Public Accountants, which represents auditors who specialize in government-related work such as this.

The mortgage brokers, for their part, want to avoid the expense of the audits. But they also contend that the provision would help the housing market. A Miller spokesman asserted that the measure would make mortgages more available by increasing the number of small and medium-size brokers who could dispense them. These smaller brokers are now prevented from qualifying for FHA lending because they find the audits, which can cost several thousand dollars, too expensive, the spokesman said. In addition, he said, the FHA program would be protected because brokers would have to put up a bond to cover potential losses.

The Senate, however, does not agree and did not include the Miller provision in its FHA overhaul legislation, which it approved last year. The final bill is being negotiated by House and Senate conferees, and congressional aides said it's up in the air whether the measure will be included.

Lobbyists Need Not Apply

Mark P. Lagon has been director of the State Department's Office to Monitor and Combat Trafficking in Persons since last year. His office coordinates federal efforts to fight modern-day slavery, including forced labor and sexual exploitation -- a fairly big task.

The job also involves fielding efforts by governments that do not believe they should be criticized for abetting human trafficking. That's where lobbyists come in.

The Republic of Cyprus, which the State Department said last year was not fully complying with minimum standards for eliminating human trafficking, wanted to argue its case. So in January, a Lagon aide received an e-mail from Cyprus's lobbyist, Timothy A. Glassco, a lawyer at Patton Boggs, asking to arrange a briefing.

"My colleague Joe Brand, a partner here, would greatly appreciate the opportunity to meet with the individual(s) responsible for writing the Cyprus Trafficking in Persons report," Glassco wrote, according to the e-mail, which was sent around Lagon's office.

An internal debate ensued until Lagon, one of four at-large ambassadors at the State Department, forcefully rejected the meeting. "I feel VERY strongly that lobbyists for Govts are not welcome in my tenure," Lagon wrote. "Feel free to say that it is Amb. Lagon's POLICY not to take meetings with such lobbyists and consultants for Govts, and that he generally considers them unwelcome even when accompanying Govts' representatives into meetings."

One reason, he wrote, was that he had been "appalled" by a meeting he did accept with Equatorial Guinea's lobbyist from Cassidy & Associates last August. A person in that meeting said the lobbyist and his client often contradicted each other, which the ambassador viewed as counterproductive.

So the policy in Lagon's office now: No lobbyists allowed.

Patton Boggs declined to comment. The lead lobbyist for Cassidy, Juan Carlos Benitez, said that he translated for Equatorial Guinea's ambassador at the meeting and that the only perceived contradiction was a momentary confusion between the terms "undocumented workers" and "trafficked individuals."

Liberals Disperse

The largest concentration of liberal lobbyists on the primarily corporate K Street is breaking up.

Americans United for Change is fleeing the nest at 1825 K Street NW and moving across the street to 1850 K Street NW.

That leaves USAction and Campaign for America's Future among other lefty groups in the old building, which has been dubbed "The Other K Street."

"The liberal movement just grows and grows," said the president of Americans United, Brad Woodhouse. "We grew out of our space."

Hire of the Week

Tita Freeman is the new executive director for communications and strategy at the U.S. Chamber of Commerce. In that role, she will help oversee the big lobby group's communications, marketing and Web content.

Freeman, 33, is well versed in representing big business. She was previously the director of communications for the Business Roundtable, an association of chief executives of large corporations. She was also, until recently, a full-time consultant with Google in Washington.

At the Chamber, Freeman reports to Tom Collamore, the senior vice president for communications and strategy. The Chamber is the world's largest business federation, representing more than 3 million businesses.

Please send e-mail tokstreet@washpost.com.

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