May 15, 2014

Divided Senate committee reports out GSE bill(1)

May 16, 2014 – The Senate Banking Committee, voting 13-9, reported out a revised Johnson-Crapo housing finance reform bill on Thursday, but whether the revised bill will reach the Senate floor is unclear.

"We applaud the efforts of Senate Banking Committee Chairman Tim Johnson and Ranking Member Mike Crapo and the members of the Banking Committee in advancing housing finance reform," said NAFCU President and CEO Dan Berger. "We still have concerns about the bill and its impact on credit unions, including the potential cost of the proposal and whether it would be workable. It is important that any ultimate housing finance reform package work for credit unions and their 97 million members, and we look forward to working with the full Senate to address our concerns should the legislation come to the Senate floor."

Johnson, D-S.D., and Crapo, R-Idaho, released their initial draft in March and has been working with the administration on the package. Senate Majority Leader Harry Reid, D-Nev., has questioned the plan to wind down Fannie Mae and Freddie Mac, a key component of current proposals, over concerns for its impact on home ownership.

During mark-up the draft bill was updated with a manager's amendment and an additional amendment which, among other things, would mandate a study by the Federal Mortgage Insurance Corporation, the entity the bill proposes would replace government-sponsored agencies Fannie Mae and Freddie Mac. Specifically, the study would look at the small lender mutual established under the bill and focus on issues such as membership eligibility, participation levels and if it is meeting the needs of community based financial institutions.

The amendments also aim to set additional limits to vertical integration in order to prevent any one institution from exerting undue influence on the housing finance market.

NAFCU has been in contact with Senate Banking members, other members of the House and Senate, the White House, Federal Housing Finance Agency and more to ensure that small institutions have equal, competitive access to the secondary mortgage market in any future housing finance system. It has meanwhile raised concerns about costs and uncertainty surrounding the proposed reforms. It has made several recommendations with other financial trade organizations to improve the discussion draft.

On Tuesday, Federal Housing Finance Agency Director Mel Watt said his agency does not plan to change its policy of allowing debt-to-income ratios above 43 percent for some loans purchased by Fannie Mae and Freddie Mac – a position NAFCU has supported. He added that FHFA will not reduce the current limits on the size of loans that can be purchased by the GSEs.