Legislative proposals for a TBA market backed by non-agency MBS as an alternative to a market driven by government-sponsored enterprises lack precedence and are full of unknowns, according to analysts. “While this is a laudable effort – and a necessary one in order to remove the government’s sup-port from the housing finance market – the extent to which private enterprise will be able to pick up the slack the GSEs leave behind is unknown,” said Benjamin Feldman, a housing policy analyst and advocate. Peter Wallison, an Arthur F. Burns fellow in financial...

For an all too brief moment last week there was bipartisanship on Capitol Hill as exasperated Democrats and Republicans took turns questioning and berating the CEOs of Fannie Mae and Freddie Mac and their regulator surrounding the issue of executive compensation at the two GSEs.Federal Housing Finance Agency Acting Director Edward DeMarco was called before the Senate Banking, Housing and Urban Affairs Committee and the House Committee on Oversight and Government Reform to explain some $13 million in performance bonuses to Fannie CEO Michael Williams and Freddie CEO Charles Haldeman and eight other senior executives at the taxpayer-subsidized firms.

House Financial Services Financial Institutions Subcommittee Chairwoman Shelley Moore Capito, R-WV, and ranking member Rep. Carolyn Maloney, D-NY, last week introduced H.R. 3461, the Financial Institutions Examination Fairness and Reform Act, to address widespread industry concerns with bank examinations. Some bankers say the reasons for certain decisions made by regulators during the examination process have not been clear. Bankers have also reported that some examiner decisions have effectively and unnecessarily reduced the amount of capital available for increased lending.

The Government Accountability Office recently confirmed the view widely held in the mortgage finance industry that federal regulators are not doing enough to analyze the cost and other effects of implementing the Dodd-Frank Act. “Little is known about the actual impact of the final Dodd-Frank Act rules, given the short amount of time the rules have been in effect,” the GAO said. The government watchdog noted that federal financial regulators are required to perform a variety of analyses, but the requirements vary and none of the regulators are...

A proposed Senate bill to steadily wind down Fannie Mae and Freddie Mac over the course of a decade appears to have some support at the Federal Housing Finance Agency, where the acting director is eager for Congress to move toward resolving the three-year-old conservatorships of the two government-sponsored enterprises. S. 1834, the Residential Mortgage Market Privatization and Standardization Act of 2011 would gradually reduce the two GSEs over 10 years through an unusual mechanism. Instead of guaranteeing the entire MBS trust as they...

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 ...