Senate Bill on GSE Reform Found Wanting
Legislation emerging from the Senate Banking Committee last week to revamp the regulatory framework of Fannie Mae, Freddie Mac and the Federal Home Loan Banks prompted disappointment among the nation’s home builders.
“The bill to overhaul the housing government-sponsored enterprises (GSEs) that was narrowly passed on July 28 along party lines by the Senate Banking Committee represents a missed opportunity to achieve a meaningful regulatory framework that strengthens and safeguards the financial health of the GSEs while preserving their vital housing mission,” said Jerry Howard, executive vice president and CEO of NAHB.
“The 11-9 partisan split accentuates deep misgivings about the bill, and even Republican members of the Senate Banking Committee expressed their reservations with the legislation before ultimately voting for passage,” added Howard.
Before the panel voted on S. 190, NAHB sent a letter to all committee members urging them to oppose the bill because it fails to adequately address the nation’s housing concerns.
The measure approved by the panel would severely curtail the investment portfolios of Fannie Mae and Freddie Mac.
“Basically, it would require Fannie and Freddie to engage in a massive sell-off or run-down of existing holdings,” said Howard. “We feel this would disrupt the mortgage markets and greatly harm the housing finance system.”
The legislation also would give the new regulator unrestricted power to increase GSE minimum capital requirements and onerous program approval authority that could inhibit the development of new products.
The bill does not include an affordable housing fund for Fannie Mae and Freddie Mac. However, an amendment offered by Sen. Rick Santorum (R-Pa.) to strengthen their affordable housing goals was accepted by a voice vote.
NAHB policy states that all housing GSEs should be required to meet appropriate affordable housing goals, as well as set aside a reasonable percentage of their profits to support affordable housing efforts, with a level playing field for for-profit housing sponsors in the criteria for awarding such funds.
Because S. 190 was approved along party lines, and contains no affordable housing fund and drastically reduces allowed investments — provisions that are important to Democrats and also supported by NAHB — the prospects for full Senate consideration of the bill remain highly uncertain.
On the House side, the Financial Services Committee this spring approved H.R. 1461 on a strong bipartisan vote of 65-to-5. The House bill, which is awaiting consideration by the full chamber, contains an affordable housing fund provision and is far less stringent in terms of portfolio limits than its Senate counterpart.
“H.R. 1461 is a tough, but fair bill that represents a good starting point as the debate moves forward. Though not perfect, on balance this is a meaningful bipartisan compromise that deserves congressional support,” said Howard.
To read the legislation, click here and enter the bill number in the box at the upper left.
For more information, e-mail Michael Strauss at NAHB, or call him at 800-368-5242 x8252.