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 ...

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...