Housing finance reform

FHFA Director Mel Watt warned Thursday that to prevent a potential draw on the Treasury Department by the government-sponsored enterprises, he is willing to act unilaterally to rebuild capital at Fannie and Freddie.

If proposed tax cuts were enacted, Fannie Mae and Freddie Mac would be required to make an initial adjustment that could wipe out their capital.

The Treasury secretary on Monday reiterated an aggressive timetable for tackling the future of Fannie Mae and Freddie Mac, an issue that has long flummoxed Congress.

Senate Banking Committee Chairman Mike Crapo and House Financial Services Committee Chairman Jeb Hensarling said they believed an agreement on housing finance reform could be struck in this Congress.

The Mortgage Bankers Association released a detailed transition plan Thursday designed to help policymakers turn the government-sponsored enterprises into private guarantors of mortgage-backed securities.

Suspending Fannie Mae and Freddie Mac's regular dividend payments to the Treasury, thus enabling the companies to replenish their reserve capital, would put their future on better footing.

The groups and industry trade associations want the Treasury Department and the FHFA to allow Fannie Mae and Freddie Mac to build up capital reserves.

Implementation of the second phase of the common securitization platform had been projected for next year, but the anticipated time frame was delayed following "lessons learned" from the first phase.

Though it's too early to have a concrete plan regarding Fannie Mae and Freddie Mac, the administration is creating a set of principles that it hopes to release in a few months.

Senate Banking Committee Chairman Mike Crapo said Wednesday that although he plans to begin working on housing finance reform and changes to the Dodd-Frank Act, the poor relationship between Democrats and Republicans will hinder any progress.