Magazine article Mortgage Banking

House Panel Passes GSE Reform Bill

Magazine article Mortgage Banking

House Panel Passes GSE Reform Bill

Article excerpt

FANNIE MAE, FREDDIE MAC AND THE 12 FEDeral Home Loan Banks would all answer to a single, brand-new, stronger government regulator under a House bill that cleared committee.

The Federal Housing Finance Reform Act of 2005, H.R. 1461, would establish the Federal Housing Finance Agency (FHFA) as an independent agency, funded outside the congressional appropriations process by assessments on the government-sponsored enterprises (GSEs).

The measure would abolish Fannie and Freddie's current regulator--the Office of Federal Housing Enterprise Oversight (OFHEO)--under the Department of Housing and Urban Development (HUD), and transfer OFHEO's infrastructure to FHFA. Furthermore, H.R. 1461 also folds the FHLBank regulator--the Federal Housing Finance Board (FHLB)--into FHFA as well.

H.R. 1461--which cleared the Housing Financial Services Committee by a bipartisan vote of 65-5, following numerous proposed amendments--now moves to the House floor for a vote.

With its powers modeled after the bank regulators, the proposed FHFA would be responsible for overseeing the achievement of the GSEs' housing mission, as well as their safety and soundness. Like bank regulators, the new agency would have broad enforcement powers, including the power to initiate receivership should a GSE become critically undercapitalized.

Under H.R. 1461, FHFA would have the power to increase minimum capital and risk-based capital standards. The measure would also grant the regulator authority to adjust the portfolio holdings of Fannie and Freddie, either for the purpose of increasing safety and soundness or fulfilling the GSEs' housing mission.

The Bush administration has indicated it favors limits to control the growth of Fannie Mae and Freddie Mac's mortgage portfolios.

Long-time Fannie and Freddie critic and bill sponsor Rep. Richard Baker (R-Louisiana) pledged to find common ground with the White House and not be "stymied by minor disagreements over a portfolio issue that nobody was even talking about six months ago. …

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