Below is a list of some of the biggest banking issues lawmakers may address between now and January amidst larger discussions over potential military action in Syria and the looming fiscal crisis.
No. 1: Mortgage finance reform
Unsurprisingly, efforts to reform the government-sponsored enterprises are expected to remain a top priority for both the Senate Banking and House Financial Services committees in the coming months.
Before Congress broke for its month-long recess, momentum was building to overhaul Fannie Mae and Freddie Mac. The House Financial Services Committee passed chairman Jeb Hensarling's bill to unwind the GSEs, while Senate Banking Committee chairman Tim Johnson and Sen. Mike Crapo, the panel's top Republican, signaled they would take up the issue together in the fall.
"I think you can officially calculate the fall as 'all housing all the time,' with some other efforts put in between," said James Ballentine, executive vice president for congressional relations and political affairs at the American Bankers Association.
Still, it remains highly unlikely a bill will be enacted this year, and it's even unclear what tangible progress can be made.
One of the biggest questions yet to be answered is whether Hensarling is able to move his bill to the House floor for a successful vote—particularly given a packed legislative schedule now focused on Syria and the budget for the next fiscal year, which begins Oct. 1. Lawmakers may also have to contend with the debt ceiling earlier in the fall than previously expected, with the Treasury Department now predicting the U.S. could breach its spending limit by mid-October.
"The macro events kind of crowd out a lot of things on the calendar," said Brian Gardner, a policy analyst at Keefe, Bruyette & Woods. "You add in Syria and an accelerated schedule for a continuing resolution [for the budget] and the debt ceiling, and September becomes a very crowded month. At this point it's tough to see how a GSE bill can get to the House floor. I don't think it's possible."
Observers added that Hensarling may also have difficulty getting the necessary votes on his controversial bill without adopting some changes to bring more Republicans on board. Because the Protecting American Taxpayers and Homeowners Act would not include any kind of government backstop for the housing market, it is unlikely to attract any Democratic supporters. But many moderate Republicans are wary of the bill for the same reason.
"House leadership will likely work on changes sufficient to allow a majority of members to vote to support the PATH Act—that is, a significant majority of the Republican conference. The House vote is likely to be quite partisan," said Daniel Crowley, an attorney at K&L Gates.
Meanwhile, Johnson and Crapo are expected to move forward on bipartisan legislation in the Senate Banking Committee, reaching out to various stakeholders. The duo are due to hold a hearing on Sept. 12 examining the "essential elements of reform." In crafting a bill, they will likely draw from a bipartisan bill by Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., which is backed by several other members of the banking panel. If Johnson and Crapo produce a bill in coming months, it's possible the committee could take a vote on it before yearend, though a timetable is very difficult to predict before legislation is even introduced.
Another open question for the housing industry remains the fate of Rep. Mel Watt, D-N.C., who has been nominated as director of the Federal Housing Finance Agency. The Senate Banking Committee sent Watt's nomination to the chamber floor in July, but it's unclear whether or when Majority Leader Harry Reid will schedule a vote on the nominee, whom many Republicans generally oppose for the position, citing his lack of technocratic experience.
"We expect the White House to expend a considerable amount of political capital in the upcoming debate over the use of military force in Syria, which lessens its capacity to force other issues such as Rep. Watt's nomination to head the FHFA," said Isaac Boltansky, a policy analyst at Compass Point Research & Trading, in a note to clients earlier this month. He added that the Syria debate "reinforces" earlier pessimism that Watt can garner enough votes for the position.
Towards the end of the year, lawmakers will also need to decide again on whether to extend a tax break for debt forgiven under short sales and other mortgage modifications. The Mortgage Forgiveness Debt Relief Act is set to expire on Dec. 31, though several bills have been introduced in the Senate to extend the provision for one or two years. The law, passed in 2007, was most recently extended as part of the last-minute deal to avert the so-called fiscal cliff at the beginning of the year.
Should Congress grant it, another extension "should be a positive for housing, as we believe there would be more foreclosures absent short sales and mortgage modifications," said Jaret Seiberg of Guggeheim Securities in a note to clients late last month. He added, however, that passage of another extension for the tax break is "far from a slam dunk."
No. 2: Battle over Fed chair nomination
Another major focus for the Senate banking panel this fall will be consideration of a new Federal Reserve Board chairman. With Fed chairman Ben Bernanke's current term due to expire Jan. 31, predictions about his successor abound, with Harvard economist Lawrence Summers and Federal Reserve Board vice chairman Janet Yellen said to be at the top of the list. The confirmation hearing for whomever the White House ultimately chooses will be a closely watched event for the industry, and any nominee is expected to face numerous banking policy questions about issues ranging from capital standards to implementation of the Dodd-Frank Act to whether some institutions are still "too big to fail."