House staff sources believe a compromise has been reached on legislation to change the regulatory structure for the two principal government-sponsored housing enterprises but their Senate counterparts are not as sanguine.
A version being drafted by the Office of the House Legislative Counsel follows the House legislation on the form of a new regulator for the Federal National Mortgage Assoclation and the Federal Home Loan Mortgage Corporation. It follows the Senate version on capital requirements and affordable housing goals. Undecided is how the companies' requests to introduce new programs would be handled.
Senate staff sources declined comment on on the specifics but were insistent that no final agreement had been reached.
The House and Senate passed different versions (H.R. 2900 and S. 2733) by wide margins. But the banking committees were barred from going to conference on the bills because Sen. Phil Gramm, R-Texas, blocked a motion to substitute the Senate language for that of the House bill, in effect requiring the House to treat the Senate bili as a new measure, hold hearings and have a floor vote.
But the chairmen and ranking minority members of the banking committees agreed to work out an informal compromise on the bills, introduce the compromise as a new bill and seek floor action. They also hope to pass it as a "clean' bill, free of the controversial bank and thrift amendments that were added in the Senate. The reasoning is that even ff some amendments are again added on the floor of either house, there will stffl be a compromise version of the regulatory bili that can be added in the closing days of the session to any vehicle, including a continuing resolution to keep programs for which appropriations bill had not been passed operating at their fiscal 1992 levels.
Meanwhile, a separate group orsrafters is trying to put together a package of the banking amendments that had been attached to S. 2733 that would have a good chance of approval. That package probably would not include an amendment regulating partnerships that caused Gramm to block subgtltutlon of the Senate version for the House bill.
The House counsel's draft generally follows the House bill. which would establish an Office of Secondary Market Examination and Oversight within the Department of Housing and Urban Development. The director and deputy director would be appointed by the president, subject to Senate confirmation. The Senate version made the regulator even more independent of HUD.
The staffs have not agreed on how to handle the companies' requests for approval of new programs. The Senate version would permit the companies to go directly to the HUD secretary for approval ff they meet the capital standards set in the bill. The House version would give the independent regulator a role in the process.
Both bills set the same minimum capital standards of 2.5% of the aggregate on-balance-sheet assets and 0.45% of certain off-balance-sheet assets, induding the unpaid principal balance of mortgage-backed securities.
ln addition, the regulator would develop risk-based capital standards. Both bills used for the credit risk component a scenario in which defaults occur over a 1 Oyear period at a rate experienced in Texas in the 19808.
For interest rate risk, the Senate version, adopted in the House counsel draft, has different interest rate scenarios for rising and failing rates. The regulator would require the companies to add capital to cover the hypothetical losses produced by the stress tests.
In the failing rate scenario, rates would decrease to the greater of ,50% of the average rate during the preceding nine months or (1) the lesser of 600 basis points below the average rate during the preceding nine months or (2) 60% of the average rate during the preceding three years. These changes would occur during the first year of the stress period and remain at the new level for the rest of the stress period.
On the up side, interest rates would increase by 17596 of the average rate during the preceding nine months or the greater of (1) 600 basis points above the average rate during the preceding nine months or (2) 16096 of the average rate during the preceding three years.
The Senate bill also takes note of the fact that defaults decline in a period of rising interest rates because homeowners' equity generally increases. The regulator would be able to adjust the default rate interest rate risk portion accordingly.