Fannie Mae-No Politics (FNMA)

[navycmdr]

Hensarling signals breakthrough in mortgage reform

Watt is seeking to avoid that draw in part
because it would also suspend payments to an
affordable housing trust fund.

......


By LORRAINE WOELLERT 12/06/2017 03:34 PM EST


House Financial Services Chairman Jeb Hensarling (R-Texas) said his comprehensive mortgage reform bill, the Path Act, is unlikely to become law and that he has begun reaching out to Democrats and others to begin work on bipartisan legislation.

“While I personally have not changed my principles or my mind, and I still believe the best path forward is the Path Act, I do not see the Path Act’s passage likely,” Hensarling said. “I stand ready to negotiate with an open mind.”


The statement is a breakthrough in mortgage reform, which has languished since the 2008 housing collapse in part because of Hensarling’s insistence that the government exit the business of guaranteeing mortgage-backed securities.

Hensarling said it is politically inevitable that any reform package will include a government guarantee of mortgage bonds like those issued by Fannie Mae and Freddie Mac, the government-backed enterprises that were bailed out after the housing collapse. The companies are currently wards of the state, devoid of capital and reliant on a $258 billion taxpayer lifeline they might need to tap as early as next year.

"I don’t want a government guarantee, I don’t think we need a government affordable housing program but in surveying the political landscape I know they will exist in any bipartisan effort," Hensarling told POLITICO. "At the end of the day I'm here to make progress."

Speaking at a conference sponsored by the National Association of Realtors and S&P Global, Hensarling endorsed a plan from the Milken Institute authored by Edward DeMarco and Michael Bright. DeMarco, former acting director of the Federal Housing Finance Agency, now leads the Housing Policy Council at the Financial Services Roundtable. Bright is executive vice president at Ginnie Mae, the government corporation that stands behind mortgages backed by the Federal Housing Administration, Department of Veterans Affairs and Department of Agriculture.

"If you're going to have a dumb policy, this is at least a smart way to do it," he told POLITICO after his speech.

“I personally continue to believe that a government guarantee in the secondary mortgage market is a bad idea, a risky and an unneeded idea,” Hensarling said at the conference. “Any government guarantee must be limited to catastrophic losses.”

He has reached out to the committee's top Democrat, Rep. Maxine Waters of California. Reps. Sean Duffy (R-Wis.) and Emanuel Cleaver (D-Mo.) are also working on ideas, he said.

Separately, he criticized efforts by FHFA Director Mel Watt to retain capital for Fannie and Freddie, which currently send their profits to Treasury under a contract known as the net worth sweep. If Congress cuts the corporate tax rate, as expected, the companies would have to write down the value of their deferred tax assets, triggering a loss that would force them to seek taxpayer help.

Watt is seeking to avoid that draw in part because it would also suspend payments to an affordable housing trust fund.

"It is unfathomable we would stop a full sweep to benefit taxpayers in order to continue to fund an affordable housing trust fund," Hensarling said. "That’s untenable."

In the Senate Banking Committee, mortgage reform is taking longer than expected as lawmakers explore new ideas for rebuilding Fannie and Freddie, Sen. Heidi Heitkamp (D-N.D.) said.

Chairman Mike Crapo (R-Idaho) had put reform of the government-sponsored entities, or GSEs, on a short-list of priorities, but the timeline has been pushed back, Heitkamp said at the NAR conference.

“GSE reform has gotten complicated, new ideas are percolating and developing,” she said. “The chair originally had said he wanted to do GSE reform first, but I think that got to be too complicated because the ideas were too new.”

Earlier proposals from Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.), and from Crapo and former South Dakota Sen. Tim Johnson, which sought a broad restructuring of the mortgage system, have been set aside, Heitkamp said.

“I don’t think it’s going to be early next year,” she said. “We’re all going to try to push very hard to make sure this is a bipartisan agreement.”