WASHINGTON — With the leading House Republican plan to overhaul the mortgage finance market stuck in limbo, several Democrats have begun work on alternative proposals that could further divide support for the GOP bill.

Rep. Jeb Hensarling, chairman of the House Financial Services Committee, introduced his legislation to unwind Fannie Mae and Freddie Mac and remove a government backstop from the market earlier this year. The bill passed the committee in late July with a vote mainly down party lines, but momentum around the effort has stalled since Congress came back from the August recess, with fights over military action in Syria, the government shutdown and the debt ceiling dominating headlines.

House leadership has yet to schedule a floor vote on Hensarling's Protecting American Taxpayers and Homeowners Act, and it remains unclear whether the Texas Republican has the necessary support. But the delay has opened the door for opponents of the bill to move forward with their own plans, efforts that could complicate ongoing discussions in the House over how to reform the government-sponsored enterprises.

"If the PATH Act had gone straight to the floor within several weeks after the committee vote this summer, and if it had gotten very broad support, we would not be having this discussion," said Brandon Barford, a vice president at ACG Analytics. "We'd be focused on the question of whether the Senate can do something. Democrats are taking advantage of the situation because there's no unanimity on the Republican side, which gives Democrats a chance to flex their muscles."

Rep. Maxine Waters of California, the top Democrat on the banking panel, announced last month that she was beginning work on her own legislation to reform the GSEs, an effort that is still underway, an aide from her office said. A discussion draft is still pending and is due out in a couple of months.

"The Waters draft will seek to address the perverse incentives created by Fannie Mae and Freddie Mac's ownership structure by ending the GSEs and creating a new, cooperative-owned securities issuer," a Waters aide said. "The discussion draft will also create an explicit government guarantee, paid for by industry and used to capitalize an insurance fund. It will improve upon other bipartisan proposals being discussed by, for example, providing for credit risk sharing on a more flexible basis."

The bill would create a cooperative that would be regulated by the government but its members would be financial institutions -- a structure that tends to have a lower risk profile than shareholder-owned firms. The legislation would also provide for small institutions to participate in the secondary market and will bolster the National Affordable Housing Trust and the Capital Magnet Funds, the aide said.

Provisions to unwind the GSEs and provide an explicit government backstop for the market align the plan in some ways with a bipartisan proposal introduced by Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., that has gained support on the Senate Banking Committee and among key housing groups. Sens. Tim Johnson, D-S.D., chairman of the committee, and Mike Crapo, R-Idaho, the top Republican on the panel, have begun work on their own bipartisan initiative to reform the GSEs, and are also expected to borrow from the Corker-Warner framework.

To be sure, a Democratic-led plan is extremely unlikely to pass the GOP-dominated House without significant bipartisan support, including from Republican leadership. But Waters, a liberal Democrat who has in the past been an outspoken supporter of the GSEs and a strong advocate for affordable housing provisions, has the opportunity to position herself as a relative moderate in the debate and exploit the divide within the Republican caucus on this issue.

That's in part because some GOP lawmakers with close ties to the housing industry find themselves stuck between a rock and a hard place — not necessarily supportive of the Hensarling plan, which the trade groups have lobbied against, but not inclined to break from the party line.

"Should she keep her caucus more or less united around a substitute and receive support from outside groups that also hold close Republican relationships, she will have further isolated Hensarling and his approach," said Barford.

If Waters were able to rally the housing industry around her plan, that could increase pressure on some Republicans not to back the Hensarling bill, and perhaps even attract cosponsors.

"If another bill gets Republicans, it shows that House Republicans are not unified," said Edward Mills, policy analyst at FBR Capital Markets. "A majority only works if you are unified enough to be able to pass legislation."

Attention is likely to turn to the few Republicans on the House Financial Services Committee who did not vote for the PATH Act as possible supporters for an alternative framework. Reps. Gary Miller of California, the committee's vice chairman, and Michael Fitzpatrick of Pennsylvania both voted against the bill, while Rep. John Campbell of California, who is retiring at the end of next year, was absent for the vote.

"A lot of eyes are going to be on Miller — does he sign on with Waters, or does he go his own way?" said Mark Calabria, director of financial regulation studies at the Cato Institute.

Miller authored his own legislation in 2011 with Rep. Carolyn McCarthy, D-NY, to unwind the GSEs and establish a new facility to issue and guarantee mortgage-backed securities. But Calabria noted that even if the California Republican joined forces with the panel's top Democrat, it would provide the effort no more than a "fig leaf of support."

"To the extent Miller brings votes, it's because the plan is something the Realtors, the Homebuilders and others can coalesce around, and that's what will bring the Republican votes," he added.

An aide to Miller said that the lawmaker is "working hard to ensure that the concepts" of his earlier bill "are incorporated into any future legislation."

Meanwhile, Hensarling continues to curry support for his own plan and push for a vote on the House floor while making as few changes as possible.

"The needle Hensarling is going to have to thread is, how does he keep industry-friendly Republicans on board, but not give up all of his maneuverability before he gets to conference with the Senate?" said Calabria.

A spokesman for Hensarling said the lawmaker "has been engaged in a series of one-on-one and group meetings with other members to discuss the specifics of the bill," adding that "the meetings have been very encouraging and are continuing."

Still, additional Democratic efforts could serve to complicate efforts at consensus in the chamber, as it's yet unclear whether various proposals will be combined with Waters' own plan before being introduced.

"This is going to be a test for Waters. It hurts her if there are four or five different Democratic proposals out there," said Calabria. "How can she get everybody on the same page?"

Rep. Carolyn Maloney of New York, the second most senior Democrat on the banking panel, is also said to be developing a framework, though a spokesman would not provide details about the thrust of that effort.

"I am encouraged by the approach taken by Corker-Warner, and our efforts will build on that bipartisan starting point," Maloney said in a statement to American Banker.

Freshman Democrat Rep. John Delaney of Maryland has also said he's working on a proposal, one that would require securitized mortgages to be backed by private mortgage insurers. Those insurers would then be allowed to obtain reinsurance from the government if and only if they could also secure a minimum level of reinsurance from a private reinsurer.

"This approach accomplishes two important policy goals. First, it ensures that the private market prices every component of housing finance — something the private market is much more capable of doing than the government. Second, it allows the government to materially expand the capacity of the U.S. mortgage market," Delaney wrote in an op-ed released last month.

The lawmaker has met with Democratic and Republican colleagues and industry stakeholders since introducing a related amendment to the PATH Act in July, a Delaney spokesman said. (The amendment was subsequently withdrawn during the vote.)

Rep. John Carney, D-Delaware, has also been working on a bill similar to the Corker-Warner plan, according to earlier press reports. But a spokeswoman declined to provide details on that effort, saying that the lawmaker is "looking closely" at ways to reform the mortgage finance system.

"He's working with members of both sides of the aisle in the Senate and House to determine the best approach to providing an explicit government guarantee that preserves a 30-year fixed mortgage," the spokeswoman said. "He's hopeful a bipartisan bill can move through the House this Congress."

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