WASHINGTON — Intensifying his efforts to cut a deal on a housing package due for a panel vote Thursday, Senate Banking Committee Chairman Chris Dodd is targeting GOP members other than Sen. Richard Shelby, the panel's ranking member.
Speculation swirled Monday that Republicans like Sen. Mel Martinez of Florida, whose state has been hard hit by foreclosures, may vote for the housing package, which includes measures designed to help stabilize home prices and reform the regulation of the government-sponsored enterprises.
An aide for Sen. Martinez said the lawmaker was waiting to see bill text, but was open to a deal.
"Senator Martinez thinks that it would be a mistake to do nothing," the aide said. "He's going make his decision based on the merits of the legislation."
Democrats are also hoping for support from Sen. Elizabeth Dole, R-N.C. Sens. Martinez and Dole joined Sen. Tom Carper, D-Del., in offering an amendment earlier this year that would have added the House GSE bill to a bill modernizing the Federal Housing Administration.
A spokeswoman for Sen. Dole did not return calls seeking comment.
Republican support is critical if Sen. Dodd's legislation has any chance of enactment this year.
Despite intense negotiations during the past two weeks, it does not appear that Sen. Dodd has won the support of Sen. Shelby.
"I wouldn't say we are worlds apart today but we are not together either," Sen. Shelby said in an interview late Monday. "I'm hopeful. I'm cautious because we have got to see the details on everything."
Sources said that a compromise remains possible, and that both sides have given ground.
"I don't think the door's closed to a deal," said Jaret Seiberg, an analyst with the Stanford Group Co. said "Both parties still have an incentive to get a housing bill done. There are simply too many key states in the presidential campaign for either party to put the issue to bed."
Sen. Dodd introduced the bill late Monday, though observers were still trying to scour through the 400-page plus legislation. The GSE measure is similar to a bill introduced by Sen. Paul Sarbanes, D-Md., in 2004 as an alternative to Sen. Shelby's legislation, but it also includes other elements.
It would establish a new independent regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, and create an advisory board composed of other regulators to advise it. The regulator would have the power to dictate new minimum and risk-based capital requirements, though minimum capital requirements could be increased only on a temporary basis unless the new agency first went through a rulemaking process.
It would also give the new agency power over the enterprises' mortgage portfolio, and explicitly says it could limit the portfolios if they posed any risk to the enterprises. It does not include language that says the portfolios could be limited due to systemic concerns, as Sen. Shelby has previously sought.
Under the bill, the GSEs must apply in writing before offering any new product, which the new agency director would have to certify is in the public interest and consistent with the enterprises' mission after a 30-day comment period. It would also require the GSEs to provide notice of any new activity, and give the new agency 15 days to determine if it should be subject to public comment as well.
Similar to a House bill passed last year, the bill would raise the conforming loan limit in high cost areas to the median home price, up to a 150% cap.
It would also require Fannie and Freddie to donate funds to an affordable housing trust fund. Under the bill, the GSEs must contribute an amount equal to 4.2 basis points on each dollar of unpaid principle of each enterprises' total new business purchases. Twenty-five percent of those funds would go to the federal government to keep the legislation deficit neutral – the rest would go to the affordable housing fund.
The affordable housing fund must assist low and extremely low-income individuals and families, the bill said.
At least three sticking points for Republicans appear to be unresolved with the new draft.
Sen. Shelby objects to the affordable housing trust fund provision, and is seeking more power for the new regulator over minimum capital requirements and the companies' mortgage portfolios.
In the interview, Sen. Shelby acknowledged all three issues remain in play, and emphasized a new GSE regulator must appropriate power to oversee the GSEs.
"They are always some issues that haven't been resolved," he said.
Asked about whether he considered Fannie and Freddie undercapitalized, Sen. Shelby replied, "Absolutely."
"They are undercapitalized, and have risk," he said. "We hope that they continue to flourish but they have got to have capital to do that and they have to be well regulated. They have been loosely, weakly regulated in the past and their risk now exceed that of France's and England's combined as far as their debt and their capital is under 2%. That ought to tell you something."
The bill also includes a measure by Sen. Dodd to stem foreclosures by reducing the principal on troubled mortgages and refinancing them into cheaper loans guaranteed by the FHA, which is similar to a bill passed by the House last week from Financial Services Committee Chairman Barney Frank, D-Mass.
Sen. Shelby, who has opposed the FHA refinancing plan, continued to express reservations in the interview.
"I'm not closing the door to anything, but I am concerned about bailouts... and the cost to the taxpayer," he said.
