The Trump administration has buckled under pressure from the powerful mortgage lending industry, led by the Mortgage Bankers Association, and bringing hundreds of low-paid IRS clerks who have been furloughed during the shutdown back to work to process forms for the lending industry. With the IRS shut down, the industry couldn’t get the necessary income verification for borrowers, threatening to also shut down mortgage lending.
So the administration figured out a way out. One that is as legally dubious as the actions taken to keep national parks open. They’re taking money from one program and using it to pay these clerks. “It seems crazy to me that a powerful bank or lobby gets to bring their people back to do their work,” said Marvin Friedlander, formerly a senior IRS official in the mid-2000s. “How about the normal slob who can’t even pay his rent?”
Treasury defends its action, saying that it’s all about the consumer. “We were advised by various parties that the shutdown of [the program] was creating significant issues for certain borrowers,” the agency said in a statement. “We are pleased to help taxpayers by ensuring this service continues despite the lapse.” Craig Phillips, an aide to Treasury Secretary Steven Mnuchin, told the Washington Post, “This action was not taken to benefit the industry. It benefits the consumers that have made loan applications.”
But that’s not what the industry says. Robert Broeksmit, chief executive of the Mortgage Bankers Association, is taking all the credit. “I said, ‘Look, this is starting to be a problem for the lending industry. […] Could you make these [IRS clerks] essential?” He’s crowing about it the results now. “I’d like to take some credit. […] Our direct request got quite rapid results.”
They are not essential employees, says Charles Tiefer, a former deputy general counsel in the U.S. House of Representatives. “They’re only allowed to keep open essential activities, and processing mortgage applications is valuable and appreciated, but do not rank with air traffic controllers.” The administration is certainly open to legal challenges here, provided someone with standing can bring the case. Who that would be isn’t precisely clear.
Meanwhile, the Department of Housing and Urban Development can’t find any money for low-income senior citizens in subsidized housing. Section 202, part of the Section 8 subsidy program, houses about 400,000 low-income elderly people and it lost authorization as of January 1. There’s no money to keep it going.