The Senate Banking, Housing and Urban Affairs Committee is expected to vote on the housing finance reform legislation next week, but there’s a growing consensus among industry observers that no amount of last-minute patchwork compromises will make the bill ready for a prime-time Senate vote. Many observers said last week’s abrupt announcement by Committee Chairman Tim Johnson, D-SD, and Ranking Member Mike Crapo, R-ID, to delay consideration of S. 1217 in order to gain more than the minimum 12 votes needed to clear the committee doomed the chances of getting the bill to the floor for a vote. A banking committee staffer told...

During a legislative markup session this week, the House Financial Services Committee approved H.R. 2673, the Portfolio Lending and Mortgage Access Act, introduced by Rep. Andy Barr, R-KY, which would deem all mortgages held in portfolio to be qualified mortgages under the Consumer Financial Protection Bureau’s ability-to-repay rule. Republican supporters characterized the bill as the ultimate “skin in the game” measure and noted it was specifically drafted to avoid the pitfalls of the “originate to distribute” model so heavily criticized for contributing to the financial crisis. But Democrat opponents said...

There’s a growing concern among participants in the secondary market that legislation in the Senate to reform the government-sponsored enterprises won’t be able to allow the to-be-announced market to function. The latest anxieties were raised by officials at Fannie Mae and Freddie Mac, whose securities flourish in the TBA market. Legislation in the Senate from Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, calls for the preservation of the TBA market but doesn’t provide any roadmap for how the proposed Federal Mortgage Insurance Corp. should accomplish that feat. “Unless the FMIC sets...

The housing finance reform legislation authored by Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, will result in higher guaranty fees and less cross-subsidization than the current Fannie Mae and Freddie Mac fee structure, according to the government-sponsored enterprises. The Johnson-Crapo bill, which was abruptly pulled from a scheduled markup before the Senate Banking, Housing and Urban Affairs Committee this week, would establish a new type of MBS with an explicit government backstop that requires private capital to absorb the first 10 percent of losses. “There is...

Concerns about the functionality of the to-be-announced market and potential incentives for riskier lending have prompted some to suggest that legislation under consideration in the Senate to reform the government-sponsored enterprises should remove the capital markets option for risk sharing and rely solely on a guarantor model. A number of agency MBS participants aren’t too pleased with the suggestions and have countered that a capital markets option is necessary in the country’s housing finance system. Under the capital markets option envisioned in the GSE reform bill from Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, investors would hold...

This week’s abrupt, last-minute postponement of a much-anticipated markup of a Senate housing finance reform draft bill effectively doomed the prospects of the legislation making it to a floor vote, note industry observers. The delay came amid continued progressive dissatisfaction with the legislation and an increasingly bold effort by advocates to keep Fannie Mae and Freddie Mac alive. Senate Banking Committee Chairman Tim Johnson, D-SD, and Ranking Member Mike Crapo, R-ID, announced to a packed committee chamber that they would delay consideration of S. 1217 in order “to build a larger coalition of support.”

The Senate’s GSE reform proposal in its current form would create an extremely high risk for Freddie Mac’s core policy functions during the bill’s proposed five-year wind down of the company, Freddie’s chief executive warned. In a confidential memo to Federal Housing Finance Agency Director Mel Watt that was leaked to the media, Freddie CEO Donald Layton said that the housing finance reform legislation by Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, fails to state clearly that the GSEs’ core policy function must be maintained and such an omission would create potentially crippling uncertainty among staffers during the transition.

While the housing finance reform legislation authored by Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, recognizes the “distinct nature and role of the Federal Home Loan Banks,” concern remains that the bill’s treatment of FHLBank regulation within the proposed regulator could lead to a conflict of interest that impedes the 12 Banks and their members, according to the American Bankers Association. An ABA memo to the members of the Senate Banking, Housing and Urban Affairs Committee suggested that lawmakers leave regulation of the FHLBanks with either an independent agency or strengthen the bill’s proposed regulatory firewalls.

The architects of the ambitious bipartisan housing-finance reform bill in the Senate have put considerable emphasis on preserving access to the new secondary-mortgage market for smaller lenders. They may not have it right yet. According to Fannie Mae and Freddie Mac, the so-called small lender mutual envisioned by Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, would face significant challenges in a new mortgage-finance world where large institutions could vertically integrate ...

The status of housing finance reform legislation has become a topic of open speculation after the leadership of the Senate Banking, Housing and Urban Affairs Committee announced a last-minute postponement of a markup this week following the submission of some 100 amendments and the continued non-commitment of support by some committee Democrats. Committee Chairman Tim Johnson, D-SD, and Ranking Member Mike Crapo, R-ID, announced to a packed committee chamber earlier this week that they would delay consideration of S. 1217 in order to “build a larger coalition of support” for their reform measure. “While we have the votes to report the bill out today, members of the committee have asked...