'Bright Line' Sought Between Primary AndSecondary Mortgage Markets

WASHINGTON - (05/26/05) -- The House Financial ServiceCommittee approved a bill Wednesday overhauling regulation of thesecondary mortgage market which gives a new regulator broad powersto draw a 'bright line' ensuring that secondary mortgage marketgiants Fannie Mae and Freddie Mac do not encroach into theoriginations market they were chartered by the government to serve.The bill would allow the two giants to continue to offer theirautomated underwriting programs, financial counseling and homebuyereducation programs--not directly related to their original missionto facilitate a secondary market--but would prevent them fromentering such areas as home foreclosures, loan brokering, insuranceand electronic signatures, areas they have dipped into in recentyears--without the express consent of the new regulator. The brightline provision is opposed by the credit union lobby, with both CUNAand NAFCU expressing concern such the measure would prevent FannieMae and Freddie Mac from expanding their assistance for smallplayers in the mortgage market, particularly credit unions. Thebill, which now goes to the full House for a vote, would also allowFannie and Freddie to buy and securitize jumbo loans up to $540,000in high-cost housing markets; require the two to set aside as muchas $600 million a year in grants for affordable housing; and wouldeliminate the requirement that five directors of each governmentsponsored enterprise be appointed by the President.