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GSE Reform Will Remain Hot Topic As Congress Returns
WASHINGTON (4/1/13)--The U.S. Congress is scheduled to return to Washington early next week, and housing issues are likely to remain a front-burner issue.

Housing policy changes discussed in the U.S. House, the Senate, and the Obama administration in recent months have ranged from almost completely privatizing the housing finance system, limiting the government's intervention in the mortgage market to times of financial distress, and using a system of reinsurance to backstop private mortgage guarantors to a targeted range of mortgages.

The Senate Banking Committee earlier this month met to discuss potential bipartisan housing finance changes, and the committee chairman, Sen. Tim Johnson (D-S.D.), said during that hearing that he would work closely with ranking committee member Sen. Mike Crapo (R-Idaho) and hold additional committee hearings before developing a comprehensive reform bill.

Crapo noted that Republicans and Democrats may not completely agree on how best to move forward, but said that disagreement should not preclude them from beginning negotiations.

However, Johnson said he is concerned by the prospect of a fully privatized mortgage financing system, noting that such a system could "place homeownership out of reach for many middle income families and rural communities."

In the Congress' other chamber, House Financial Services Committee Chairman Jeb Hensarling (R-Texas) has made housing finance reforms a top priority of his committee, and the chairman has held several hearings on the topic.

At a March 19 hearing, Hensarling and Federal Housing Finance Agency Acting Director Ed DeMarco agreed that Congress should get to work and develop a plan for the future of the U.S. mortgage market. Hensarling has called for a housing finance system that is both sustainable and competitive. He wants to see the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, to be shut down.

DeMarco noted during that hearing that only Congress can abolish or modify the GSE charters "and set forth a vision for a new secondary market structure."

There is broad consensus that comprehensive housing finance reform will not arrive quickly or easily. Meanwhile, bills that address other aspects of the housing market also have been introduced recently.

In the House, the ranking financial services committee member, Rep.  Maxine Waters (D-Calif.), reintroduced legislation meant to strengthen the Federal Housing Administration (FHA) and help ensure that agency's long-term solvency.

A separate Senate bill, the Jumpstart GSE Reform Act, would prohibit any increase in the guarantee fees charged by Fannie Mae and Freddie Mac from offsetting other government spending, and prohibit the sale of preferred GSE shares without congressional approval and structural housing finance reform. (See March 15 News Now story: Housing Policy Bills Unveiled In House And Senate.)

The Credit Union National Association has repeatedly said that any changes to secondary mortgage market structure must allow credit unions and other small issuers to maintain full and unrestricted access to that market. CUNA has also highlighted the importance of preserving 30-year, fixed-rate mortgages and ensuring that the secondary market is strong enough to weather economic adversity.

Editor's note: This article is the first ihn a two-part series on housing policy reform. Watch News Now this week for a look at related regulatory actions.


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