Prospects dimmed last week for quick passage of a bill to reform regulatory oversight of the secondary mortgage market as key constituents diverged on their priorities.
Members of the Senate Banking Committee expressed support during a hearing last week for a proposal to add the Federal Home Loan Banks to any regulatory scheme for secondary market giants Fannie Mae and Freddie Mac, a position being resisted by their counterparts in the House.
The hearing, which featured key members of the Bush administration and representatives of Fannie Mae, Freddie Mac and the FHLBs, came two weeks after the House Financial Services Committee abruptly cancelled a vote on a reform bill amid growing confusion on a course of action.As a result, chances for the hoped-for quick action on the bill appeared to dwindle. "It's dead for this year," said a lobbyist for a large s&l who has been working with both the Senate and the House on the issue.
Both Treasury Secretary John Snow and Housing and Urban Development Secretary Mel Martinez expressed the Bush administration's support during last week's hearings for a proposal to move the Fannie and Freddie regulator from HUD into the Treasury and to give it full powers to set capital standards and approve new products and services for the two mortgage giants.
The two Bush administration officials also joined a growing consensus to move oversight over the 12 regional home loan banks under the same regulator. "The importance of our housing finance markets requires that all of the housing enterprises be included in a single program of world-class supervision," said Snow.
Representatives from both Fannie Mae and Freddie Mac testified last week that they support the simple move of their regulator, now known as the Office Of Federal Hosing Enterprise Oversight, or OFHEO, into Treasury, but not the powers to regulate capital and products and services.
"There is a consensus in the housing market that innovation is bets protected by maintaining HUD's role as mission regulator for Fannie Mae and Freddie Mac," said Franklin Raines, chief executive for Fannie Mae. "Many of our lending partners in the housing industry, such as the National Association of Home Builders, the National Association of Realtors, the Independent Community Bankers of America, the Enterprise Foundation, LISC, and Self-Help Credit Union, fear that moving program approval authority away from HUD could diminish housing as a public policy priority, and create a barrier to innovation that hinders us from achieving our mission within our charter. We share these concerns, and as a result we support maintaining HUD's authority to review programs."
Also complicating the issue is Fannie's lobbying effort to reign in the FHLB's growing secondary mortgage market program, which is increasingly competing with Fannie Mae and Freddie Mac to purchase mortgages from banks and credit unions. Fannie is lobbying Congress to impose new restrictions and taxes on the FHLB's Mortgage Partnership Finance Program if the FHLBs are added to the new regulatory scheme.
