Magazine article American Banker

Senate Passes Bill to Spur More Issues

Magazine article American Banker

Senate Passes Bill to Spur More Issues

Article excerpt

WASHINGTON -- The Senate approved a bill aimed at increasing participation by private issuers in the secondary mortgage market. The bill is the same as the version adopted by the House this summer and is expected to be signed into law by President Reagan.

The Secondary Mortgage Market Enhancement Act seeks to allow banks, savings and loans associations, and other issuers to pool mortgages and to market them with the same ease now enjoyed by the securities of the government-sponsored agencies. Those agencies are the Federal National Mortgage Association, or Fannie Mae, the Federal Home Loan Mortgage Corporation, or Freddie Mac, and the Government National Mortgage Association, or Ginnie Mae.

The bill, S. 2040, does not allow bank and thrift institutions to underwrite private mortgage-backed securities aside from their own issues. That is a legal power these industries have been vigorously seeking.

Separate legislation that does include powers enabling banks and thrifts to underwrite mortgage-backed securities and municipal revenue bonds has stalled in Congress and is unlikely to be passed this year.

Some $2 billion in private mortgage securities were sold last year by issuers such as General Electric Credit Corp. and Norwest Mortgage. But this was dwarfed by the approximately $70 billion issued by the three agencies. State Laws Preempted

The bill preempts state laws that have been seen as obstacles for private mortgage security issuers, who must compete with the government-sponsored agencies for investors. …

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