Despite tangible progress in recent months, legislation is hardly poised for final passage. The Senate Banking Committee has agreed to turn to the issue this fall, while some House Republicans are pushing for a floor vote on competing legislation.
Still, major substantive disagreements, including over the existence and design of a government guarantee for the mortgage finance market, remain unsettled and have the potential to sideline discussions down the road.
Beyond those substantive roadblocks, lawmakers are also facing a time crunch that could make it harder to pass legislation in the near term due to immediate pressures like the upcoming budget fight, followed by the distractions that come with another round of campaigning and elections in 2014.
"Lawmakers want to get something done, but how quickly that develops given the business of politics is the key question," said Jason Ware, an analyst at Albion Financial Group. "It's likely to be more of a marathon than a sprint—they may be squeezed on more important issues in short run, like funding the government this fall. Immediately after, many will turn their attention toward the fight for political survival in 2014."
Below we outline four likely hurdles that could slow the pace of housing reform over the coming year:
Another Budget Fight
Lawmakers will face several fiscal fires almost immediately after they return from the five-week summer break next month. Congress will have just three weeks until a government shutdown on Oct. 1, unless the House and Senate can reach an agreement for funding the federal agencies for fiscal year 2014, including making a decision about whether or not to extend sequestration—the across-the-board budget cuts that went into effect in the spring. Soon after, lawmakers will again have to grapple with whether or not to raise the $16.7 trillion debt ceiling or risk the U.S. defaulting on its debts.
These fights, which have historically proven quite intense, are expected to be the main focus in Washington through the fall and perhaps into the winter.
"There's a limited amount of Congressional bandwidth and it's most likely to be focused almost entirely on the upcoming fiscal fights in the fall," said Isaac Boltansky, a policy analyst at Compass Point Research & Trading. "Pretty soon the goals will be reset, so that Congress will pat itself on the back for just avoiding the debt ceiling and a government shutdown, rather than advancing major legislation before the end of the year."
Still, committee level work may proceed as the budget battles play out, giving the Senate Banking Committee a chance to hold additional hearings and even produce legislation to reform the government-sponsored enterprises. But getting a bill to the floor in either chamber could prove difficult in the midst of fiscal negotiations, which could delay the chances of moving toward a legislative conference that many have predicted will be necessary to resolve differences in the House and Senate approaches to reform.
Moreover, an ugly showdown over the country's fiscal problems could sharpen the political divide, threatening chances for bipartisan cooperation on issues like mortgage finance reform.
"A protracted budget fight could poison the well for any other deal getting done," said Edward Mills, a policy analyst at FBR Capital Markets.
President Obama is expected to name a nominee to succeed Federal Reserve Board Chairman Ben Bernanke this fall—a major announcement that could sidetrack the Senate Banking Committee from its work overhauling Fannie Mae and Freddie Mac.
"Given that there seems to be a very high certainty that it's going to be a new Fed chairman and it's not just a reconfirmation, I suspect that the committee is going to spend a fair amount of time vetting the candidate," said Brian Gardner, a policy analyst with Keefe, Bruyette & Woods.
Lawmakers on the Senate Banking Committee will likely hold informal meetings with whomever the president nominates, and then will need to schedule a confirmation hearing and subsequent vote before the nomination moves to the Senate floor.
To be sure, the process isn't one that's likely to distract the committee from other work for long stretches of time. But it's a top item on the agenda, particularly if Obama opts for a controversial choice that requires extra vetting. That will be particularly true if Obama nominates Harvard economist Lawrence Summers for the job. Summers is a divisive policymaker who is already facing opposition from lawmakers in both parties.
"Summers would draw fire from both sides," Gardner said. "If it is Summers I imagine the confirmation hearing and the debate on the floor to at least be more contentious."
Meanwhile, two Fed governors are also expected to depart soon, and replacements will need to be confirmed. Elizabeth Duke is set to retire at the end of the month and Sarah Bloom Raskin has been nominated for a top job at the Treasury Department, which will require confirmation by the Senate Finance Committee and the full Senate.
Obama and many lawmakers are also continuing to push for an overhaul of the immigration system, and while the prospects for a deal aren't high after the House failed to pass comprehensive legislation earlier this year, it's still possible the issue could take on new prominence.
The president even tied the issue to housing during a major address earlier this month, arguing that fixing immigration is critical for helping the mortgage market.