CORKER UPDATE! FRESH NEWS
National Mortgage News
Copyright 2008 Source Media Inc. All Rights Reserved.
July 22, 2013
Volume 37; Issue 42
Section: STREET SMARTS
Corker-Warner Bill Shows Some Consideration
Bonnie Sinnock
The authors of the Corker-Warner government-sponsored enterprise bill acknowledge that they have not drawn up everything needed to effectively reform Fannie Mae and Freddie Mac yet, but they have shown some consideration of the industry in what they have done so far.
"I think the market can help us get this right," Sen. Mark Warner, a Virginia Democrat, said during a discussion at a Bipartisan Policy Center event last week, where he credited a BPC research paper as a key influence in the creation of the bill.
He said among the things the creators of the bill have spent a lot of time thinking about has been ensuring community banks have equal access.
"We may not have it perfectly right," but the legislative effort is a "start," said Warner, noting that the process' scope is daunting.
"It's almost kind of remarkable that we created these entities in the past that had so many functions," he said.
"I never thought I'd know this much about housing finance system plumbing," said Warner.
"It is complicated," he said.
Bob Corker, a Tennessee Republican, said he believes separating the guarantor function from the issuer function is "a much better system" than the status quo, given the dominance in the mortgage market Fannie Mae and Freddie Mac currently have.
"These things are becoming piggy banks," he said of the government-sponsored enterprises, noting that "if we don't deal with these entities soon" the government may literally pay for it.
Among things one of the two authors of the bill wants feedback on is how to structure reform such that it does not disrupt the government-sponsored enterprises' involvement in the multifamily market the bill seeks to preserve, Corker said.
This piece of the business "didn't get Fannie or Freddie into trouble," said Warner.
Corker expressed regret that the acting director of the government-sponsored enterprises' regulator, Ed DeMarco, was slated at deadline to potentially be replaced as head of the Federal Housing Finance Agency by Rep. Mel Watt, a North Carolina Democrat who has faced opposition from Corker and other Republican senators who have cited his lack of experience.
But Warner said Watt "has a deep background in this area."
Among the things the two said they do agree on is what they call the bill's pragmatic approach, which aims to take a middle road between those who call for the government-sponsored enterprises' dissolution and those who call for their continuation.
"I think our bill strikes the appropriate balance," Corker said.
Warner said has heard some argue for maintaining the status quo when it comes to the government-sponsored enterprises but believes the public sector risk exposure involved makes this "totally unpalatable."
However, they do need to be preserved, he said, citing the value of the guarantee to both foreign and United States investors in Fannie Mae and Freddie Mac's mortgage-backed securities.
"We need that government backstop," he said, also noting that they make the 30-year fixed rate mortgage possible.
Warner added that "the human capital expertise in those institutions has a very important role to play" in their new structure.
Corker said he believes this is a good time to try to move the legislation forward as the legislative calendar is "fairly open" and officials are concerned this is "the one piece of unfinished business" in financial reform not addressed by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
But "the window is closing," he said.
