Go ahead, kick me...

Today is Housing Secretary Alphonso Jackson's last day on the job, with the Washington Post planting a foot on his rear on the way out the door.

An article in last Sunday's Post deserves credit for attempting to go beyond the allegations of cronyism that forced Jackson to resign, and taking a deeper look at the role HUD policies may have played in the housing downturn. Unfortunately, the article doesn't deliver on that promise.

The Post claims that because Jackson "pushed for legislation that would make it easier for federally backed lenders to make mortgage loans to risky borrowers who put less money down," he will be "remembered as a Cabinet secretary so committed to carrying out President Bush's goal of increasing homeownership that he encouraged policies that threatened to exacerbate the mortgage crisis."

While it's true that Jackson pushed for an expansion of FHA loan guarantee programs, what the story doesn't mention is that just about everyone in Congress eventually signed off on the idea, which some advocated as a way to counter explosive growth in subprime lending.

Legislation that would have reduced or eliminated 3 percent down payment requirements for FHA loan guarantee programs, boosted loan limits, and allowed HUD to employ risk-based pricing -- all the fundamental elements of Jackson's plan -- passed the House in a 348-72 vote on Sept. 18, and the Senate in a 93-1 vote on Dec. 14.

Those votes demonstrate that rather than being off in the wilderness, Jackson and HUD were actually part of the bipartisan herd supporting an expansion of FHA loan guarantee programs. If Congress had been able to agree on the issue back when Jackson and the Bush administration put their FHA expansion plan forward two years ago, there's a chance subprime lending would not have gotten as out of hand as it did.

With upper loan limits of $362,000 in high-cost areas and $200,000 in normal markets, FHA was all but shut out of many regions during the housing boom. In California, FHA guaranteed less than 5,000 purchase and refinance loans in all of 2007. According to many experts, subprime lenders stepped into the vacuum there and elsewhere.

As subprime lenders took market share away from FHA's loan guarantee programs (not to mention Fannie Mae and Freddie Mac), the White House and Congressional lawmakers on both sides of the aisle agreed that steps to modernize FHA loan guarantee programs were long overdue. They just couldn't see eye to eye on all the details.

Some lawmakers didn't fully embrace risk-based pricing, which would allow FHA to charge higher premiums in order to insure borrowers it's turned down in the past. Others in Congress had reservations about reducing minimum down payment requirements. There were disagreements over how much to increase FHA loan limits.

FHA modernization legislation remains stalled in Congress to this day, as differences between the bills approved by the House and Senate must still be reconciled. While the FHA modernization bill passed by the House last fall, HR 1852, would have allowed FHA to guarantee zero-down loans, the Senate bill approved in December, SB 2338, would have maintained a 1.5 percent minimum down payment requirement, and delayed full implementation of risk-based pricing for 12 months.

Since Congress was unable to get its act together -- not only on an FHA modernization bill, but reforming oversight of scandal-plagued Fannie Mae and Freddie Mac -- the Bush administration and Congress agreed to temporarily raise loan limits for FHA, Fannie and Freddie to 125 percent of the median home price in high cost areas, with an upper cap of $729,750, through the end of the year. The Bush administration agreed to include the temporary increases in an economic stimulus package that provided billions in tax breaks after Democrats agreed to put FHA modernization -- and strengthened oversight of Fannie and Freddie -- on the fast track for approval.

It's true that today, there's less enthusiasm for reducing FHA minimum down payment requirements than there was even a few months ago. Most big private mortgage insurers have eliminated zero-down programs and the Senate's latest FHA modernization proposal -- included in the Foreclosure Prevention Act of 2008 -- actually calls for a slight increase in minimum down payment on FHA-backed loans to 3.5 percent. That bill would also permanently boost FHA loan limits to 110 percent of median home price, with an upper cap of $550,000.

But the Post's assertion that Jackson's FHA modernization proposal would somehow have exacerbated the mortgage crisis is also undermined by the fact that the Federal Housing Administration has become the focal point of plans by both Republicans and Democrats to mitigate the impacts of the meltdown in lending.

The Bush administration created the FHASecure program to help borrowers refinance out of ARM loans into more affordable fixed-rate mortgages. Rep. Barney Frank, D-Mass., wants to give FHA the authority to guarantee $300 billion in refis when lenders agree to write down principal on troubled loans. Both programs have their critics. But there is little disagreement that, like it or not, FHA, Fannie and Freddie are going to be major players in the eventual housing recovery.

What's ironic about the Post's story is that the Bush administration (and Republicans in general) usually come under fire from housing advocates for attempting to limit the government's role in lending -- especially when it comes to Fannie and Freddie, which during the housing boom were hobbled by caps on their portfolios and requirements to maintain additional capital (those limitations were imposed in the wake of management and accounting scandals that forced both companies to restate several years of earnings). Some critics say the limits on FHA, Fannie and Freddie were one reason "private label" lenders -- many employing much looser underwriting criteria -- were able to boost their market share so dramatically during the boom.

To claim that the administration's lone attempt to expand a government-backed loan guarantee program "threatened to exacerbate the mortgage crisis" suggests a lack of awareness of the changes that took place in the lending industry during the housing boom, or the motives for expanding FHA loan guarantee programs.

More convincingly, perhaps, the article also suggests that under Jackson, HUD's relaxed paperwork requirements for lenders left it more vulnerable to fraud, and that HUD made enforcement of fair-lending laws a low priority. One reason HUD streamlined its approval process for its loan guarantee programs was because many lenders found the process so burdensome they would not participate in the programs at all.

Whether HUD has been lax in enforcing fair-lending laws or not, critics of the Bush administration have said that where more enforcement was needed most was from regulators of banks and securities dealers, such as the Federal Reserve, Office of the Comptroller of the Currency and the Securities and Exchange Commission. The Bush administration has responded by proposing a reorganization of the financial regulatory system.

Finally, the Washington Post story does not even touch on an area in which HUD might have played the greatest role in curbing aggressive lending during the housing boom -- RESPA reform.

When Jackson took over as acting HUD director in 2003, HUD was fighting off a barrage of industry criticism of proposed changes to the Real Estate Settlement Procedures Act. The plan HUD put forward in 2002 -- to allow settlement services to be packaged with loans -- was complex and controversial. But instead of working quickly to address industry concerns and pushing through new rules, HUD tinkered with its proposal for a couple of years before shelving it.

HUD unveiled a new RESPA reform plan in March that concentrates on simplifying loan disclosures to help consumers comparison shop for loans and settlement services. A final rule won't be published until November at the earliest with implementation in 2009. HUD says consumer testing of the new disclosures show they do a better job of informing borrowers of loan features like teaser rates, and help them compare the fees charged by lenders to find the best deal.

HUD estimates the simplified disclosures will help consumers save $8.35 billion a year. Had those disclosures been in place during the frenzied buying of the housing boom, many buyers who got into homes by taking out loans they didn't understand might have instead gone with more affordable mortgages -- or not taken out a loan at all.

Whatever the case, when historians write the history of the mortgage meltdown and housing downturn, Alphonso Jackson is likely to be a minor figure.

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