Though controversial differences remain, congressional committees could start drafting legislation to create a new regulator for Fannie Mae and Freddie Mac and regulatory oversight of the two secondary mortgage market giants within weeks and send a bill to the president by the end of the year.
Senate staffers representing both the Republicans and Democrats agreed with this assessment during last week's Mortgage Bankers Association's National Secondary Market Conference.
"I think we're really close," Joe Cwiklinski, staff director of the securities and investment subcommittee, told the San Francisco conference. Adam Healy, legislative assistant to Sen. Tim Johnson (D-SD), agreed, saying "there appears to be a convergence on some of the issues."
One issue on which some division remains is how to manage the size of the government-sponsored enterprises' portfolios. While some are calling for strict caps, a consensus seems to be building to allow the new regulator to determine the appropriate amount of the two companies' holdings, the staffers said. Perhaps more difficult is the question of what is and is not a secondary market function.
But the staffers think this issue can be worked out, too. "Our differences aren't that far apart," said Cwiklinski, who also is legislative assistant to the subcommittee chair, Sen. Chuck Hagel (R-NE). "It's in everyone's best interest to have a bill this year."
Credit unions have a huge stake in the reform bid, which is considered the biggest financial services issue on Capitol Hill this Congress. The two mortgage market players, as well as the Federal Home Loan Banks, which are expected to be included in the new regulatory scheme, not only buy the vast majority of conforming mortgages sold by credit unions on the secondary market, but they also serve as the major investment vehicle for surplus credit unions funds, far exceeding U.S. Treasuries or corporate credit unions.
