After years of being mum on what he thinks a reformed secondary mortgage market should look like, Federal Housing Finance Agency Director Mel Watt revealed FHFA’s goals for a post-conservatorship housing-finance system. Prompted by what Watt called “the growing perception that reform could be achievable this year,” he wrote to the Senate Committee on Banking, Housing and Urban Affairs on Jan. 16 outlining FHFA’s views on reform, which include an explicit government guarantee for mortgage-backed securities comprised of conventional home loans. According to the document, a copy of which was provided to Inside The GSEs, Watt and his staff reiterated that an ongoing conservatorship is not sustainable.

Craig Phillips, counselor to the secretary at the U.S. Department of Treasury, advocated for a legislative solution to the ongoing conservatorships of Fannie Mae and Freddie Mac. He said the decision to allow the GSEs to retain a small capital buffer was a litmus test on housing reform. Although he said Treasury didn’t feel that Fannie and Freddie have an immediate capital problem because they have lines of credit, Phillips said there was somewhat of an “optical issue,” which led to the Treasury’s decision to allow the GSEs to retain up to $3 billion in capital in December. Speaking at a Women in Housing and Finance public policy luncheon in Washington, he said, “We think that decreases tension over this point. There was...

The stars are aligning for housing-finance reform, according to an analysis by K&L Gates. The law firm said it believes that reform may finally be addressed in the first half of this year. Sens. Bob Corker, R-TN, and Mark Warner, D-VA, have been circulating a draft proposal to other senators and the Trump administration. The firm noted that the Corker-Warner proposal contains features such as a federal government guarantee for mortgage-backed securities in the event of catastrophic losses, and it has the GSEs continuing to exist under government conservatorship until competitors enter into the securitization market for mortgage loans.

Issues related to mortgage servicing, including the rising costs to service mortgages today, should be included in talk of housing-finance reform, according to a new paper by the Urban Institute. Since the housing downturn, mortgage servicing costs have risen dramatically, which has reduced access to credit and forced some depository institutions to leave the market. The UI said that the foreclosure crisis in 2007 upended the pre-crisis servicing model. And despite its importance, the report said, mortgage servicing is frequently overlooked in major policy conversations. “That is a mistake. The servicing industry has changed dramatically since the 2008 mortgage default and foreclosure crisis and subsequent Great Recession,” said the paper.

Borrowers in rural communities would suffer if the resolution of the limbo status of Fannie Mae and Freddie Mac winds up creating more headwinds for community-based banking institutions.The Brookings Institute published a new report by the Center for Responsible Lending explaining how housing-finance reform proposals will profoundly affect lending in rural communities. The report said the GSE financing meets a critical need in rural areas, home to almost a quarter of the population and17.5 percent of mortgage loans in the U.S. In 2016, 30.3 percent of all loans originated in rural areas were sold to Fannie and Freddie, the CRL said.

Although the stars might be aligned for legislative reform of Fannie Mae and Freddie Mac this year, new developments late this week illuminate the difficulty of the task at hand.

The recently enacted Tax Cuts and Jobs Act was pitched as a simplification of the tax code. And while the bill could ultimately reduce some tax-related complexities, lenders are facing sweeping changes this year.

The House Financial Services Committee this week was advancing more than a dozen and a half regulatory relief measures as Inside Mortgage Finance was going to press, including some mortgage-related legislation that would expand the qualified-mortgage box for smaller entities and exempt many institutions from the rules and regulations issued by the Consumer Financial Protection Bureau.

Bipartisan legislation was introduced last week in the U.S. Senate to protect veterans and service members from predatory serial refinancing by requiring lenders to show the transaction actually bene-fits the borrower.

As the dust settles from tax reform legislation passed at hyper speed at the end of 2017, industry analysts project that demand for jumbo purchase mortgages will take a hit. The Tax Cuts and Jobs Act reduced the amount of new debt eligible for the mortgage interest deduction. For purchase mortgages taken out on Dec. 15, 2017, and beyond, only $750,000 of debt will be eligible for the interest deduction. Previously, the limit was $1.0 million. Additionally, deductions from federal taxes for ...