The banking panel last month passed the Hensarling-backed Protecting American Taxpayers and Homeowners Act along party lines. The bill would unwind Fannie Mae and Freddie Mac and largely eliminate a government backstop for the mortgage finance system. But the legislation has faced significant pushback from Democratic lawmakers and many industry representatives.
Representatives from groups including mortgage bankers, Realtors and home builders credit Hensarling with helping to jump-start the reform process and say they are in discussions with the Texas Republican. But they also highlight key changes they want in the bill, including the addition of a systemwide government guarantee.
"We've made very clear our support for his initiative to transition to a future state, as well as our concerns about the PATH Act," said David Stevens, president and chief executive of the Mortgage Bankers Association. "We've heard from him directly that he wants a law, and that this isn't just a political exercise—that he recognizes that means there will need to be some form of compromise to get there."
So far, trade groups have largely focused on communicating with lawmakers and their staff via letters and in meetings, while encouraging their individual members to do the same.
"We've reached out to our members all over the country—those who have congressmen on the House Financial Services Committee or in Republican districts that still have serious concerns or lingering concerns about the housing market," said Jerry Howard, chief executive of the National Association of Home Builders. "We're letting them know that the PATH Act will further retard the economic recovery and to encourage Hensarling to make changes before he brings it to the floor."
Housing advocates are paying most of their attention to the House bill in part because it is further along than its counterpart in the Senate. But the industry's concern over the lack of a federal backstop in the Hensarling bill has also heightened interest in the legislation's fate.
Leaders of the Senate Banking Committee have agreed to take up the issue in the fall and will likely use a proposal by Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., as the starting point. The Corker-Warner plan would unwind the government-sponsored enterprises, like in the House bill, but it would still maintain a government guarantee to cover losses borne by private investors in a crisis.
The approach favored in the Senate for now has proven a more palatable option to many in the housing industry.
"When you're lobbying, if you're against something it's very helpful to be for something too, or you run the risk that the members you are speaking to tune you out," said Edward Mills, a policy analyst with FBR Capital Markets.
But at the same time housing advocates are weighing how aggressively to oppose Hensarling's bill in its current form.
"The industry is certainly debating internally whether killing the PATH Act on the floor is a benefit or not," said Mark Calabria, director of financial regulation studies at the Cato Institute. "The industry would like to know what the future's going to look like. There's an understanding that if you kill the PATH Act, you might not get anything done."
Industry representatives emphasized that for now they are simply making their preferences known to lawmakers about how a future housing finance system should be structured.
"It's sort of in the educational stage right now, making sure every office understands our concerns and is aware of them," said Jamie Gregory, deputy chief lobbyist for the National Association of Realtors.
That sort of cautious approach may be most effective in the short term since nobody wants to make enemies in the early stages of what could be a protracted fight over GSE reform, observers said.
"Most of the industry sees this as one of their more important battles. But if you want to have a seat at the table, you can't burn the table," said Calabria.
The MBA's Stevens added that GSE reform will ultimately be "a constructive process—one that's going to require compromise for anything to become law and be signed off by the president."
Still, some within the industry may opt to turn up the heat on Hensarling if they worry that House passage of his bill could hinder negotiations over a final reform plan.
"There's a viewpoint that, if legislative provisions advance, they have a habit of sticking around," said Isaac Boltansky, a policy analyst at Compass Point Research & Trading. "Bills tend to have a much longer shelf life if they've been passed by a chamber of Congress."
Hensarling publicly urged House leadership to take up the legislation at a Bipartisan Policy Center event in Dallas earlier this month, and indicated he would be open to making changes to the bill.
A spokesman for the banking panel declined to provide an update on whether or when a vote might take place.
But even if lawmakers support changes to the Hensarling bill, House leadership may be reluctant to force lawmakers to vote on such a controversial issue in advance of the midterm elections, particularly until there is more clarity about the Senate's plan.
"There's no reason for Republican members to take what could be a tough vote ahead of the elections, unless they know the Senate is going to go forward," said Boltansky. "If I'm in House leadership, I'm really looking to the Senate to show more concrete progress on this before I schedule anything on the floor."