Two new bills aimed at increasing non-agency activity were introduced in the Senate last week. One would wind down the government-sponsored enterprises while the other would establish a framework for covered bonds. S. 1834, “The Residential Mortgage Market Privatization and Standardization Act” introduced last week by Sen. Bob Corker, R-TN, would gradually reduce the portion of the mortgage-backed security guarantee provided by Fannie Mae and Freddie Mac. Within 180 days of the bill’s enactment, the GSEs could only issue MBS with a guarantee for 90 percent of a bond. The guarantee on...

President Obama this week signed into law a stop gap spending measure, which, among other things, reinstates temporary higher limits for loans insured by FHA. The minibus bill, which combines several appropriations bill, passed the house on a vote of 298-121. The Senate approved previously approved it 70-30. The measure raises the FHA’s maximum loan limit back up to $729,750 after it had fallen to the permanent statutory level of $625,500 on Oct. 1, and extends it through the end of 2013. The new limit is effective immediately. After being extended three times – in 2008, 2009 and 2010 – the higher loan limits finally expired on Oct. 1 this year and were ...

The FHA Mutual Mortgage Insurance Fund for single-family loans again fell short of minimum capital standards, spurring renewed warnings of a taxpayer bailout if losses continue to mount. According to FHA’s annual report to Congress on its financial status and the condition of the MMI Fund, reserves dropped to 0.24 percent in 2011 from 0.50 percent last year. This means that the agency is holding only $2.6 billion of excess reserves, down from $4.7 billion the year before, against roughly $1.1 trillion of FHA-insured loans. The report also noted that unless housing prices stabilize and losses drop, the fund has a 50 percent chance of a taxpayer bailout. The negative effects in the report’s “base case” scenario were caused by ...

Legislation that would keep VA funding fees at their current levels through FY 2016 was sent this week to President Obama for signature. The House of Representatives passed the bill, H.R. 674, the 3 Percent Withholding Repeal and Job Creation Act of 2011, on Nov. 16, with amendments from the Senate. The Senate approved the bill on Nov. 10. The president is expected to sign the bill. However, if the bill is not signed by Nov. 18, funding fees will decrease as scheduled for a short period, according to the Department of Veterans Affairs in a published guidance to VA lenders. If funding fees do reset to the lower amounts ...

The Obama administration this week proposed a new rule that would establish uniform procedures for the resolution of disparate impact allegations under the Fair Housing Act at a time when the whole legal underpinnings of disparate impact are slated for review by the U. S. Supreme Court. In a proposed rule that has been in preparation for months, the Department of Housing and Urban Development argued that it has the authority to apply the disparate impact theory of discrimination in the context of fair housing, including fair lending charges. The purpose of the proposed rule, HUD says, is to clear up uncertainty about...

Slashing the pay of Fannie Mae and Freddie Mac executives would almost certainly lead to an accelerated brain drain and increased losses that would have to be covered by taxpayers, said the heads of the two government-sponsored enterprises and their regulator during hearings on Capitol Hill this week. It’s a tough sell. The House Financial Services Committee this week approved legislation to suspend bonus payments to top GSE officials and move Fannie and Freddie to a government pay scale. Federal Housing Finance Agency Acting Director Edward DeMarco appeared before the Senate Banking, Housing and Urban...

A significant drop in the FHA’s Mutual Mortgage Insurance Fund’s excess capital reserve has renewed calls for a smaller FHA and a limited government role in the mortgage market, even as opponents argued for the agency to remain on track and continue insuring high-quality loans. The annual actuarial report on the condition of the MMI Fund released this week revealed that the fund’s capital reserves dropped from 0.50 percent at the end of fiscal 2010 to 0.24 percent as of the end of September, the close of the government’s 2011 fiscal year. The program is required to have minimum capital reserves of 2.00 percent. The FHA was...

After years of on-again, off-again activity behind the scenes while the House of Representatives has repeatedly taken tentative steps toward creating a covered bond marketplace, the Senate finally got into the game with the introduction this week of legislation nearly identical to the bill introduced in the House earlier this year. On Wednesday, a small bipartisan group from the Senate Banking, Housing and Urban Affairs Committee introduced the “United States Covered Bond Act of 2011,” which is designed to create a legislative framework to expand funding options for U.S. financial institutions. Co-sponsors include...

Republican Sen. Bob Corker this week introduced legislation that would wind down Fannie Mae and Freddie Mac in part by limiting their new MBS issuance to a declining share of total new mortgage securitization. The Tennessee lawmaker’s Residential Mortgage Market Privatization and Standardization Act would “responsibly unwind” the government-sponsored enterprises by gradually reducing their portfolios of guaranteed mortgage-related assets while taking steps to bring uniformity and transparency to the housing market so that private capital can begin to replace the GSEs. The Corker bill would annually reduce the...

Industry groups are taking seriously new legislation introduced on Capitol Hill that would impose a tax on all securities trading activity, even if most observers see little likelihood of such “Robin Hood” tax legislation being enacted by a polarized Congress. Sen. Tom Harkin, D-IA, and Rep. Peter DeFazio, D-OR, last week introduced the Wall Street Trading and Speculators Tax Act, which would impose a 3 basis point tax on all non-consumer trading of securities, stocks, bonds, interests in partnerships and trusts, and derivative financial instruments. The tax would not be applied on new issuance or debt with...