GSE Bill Protects AU Ops

The new GSE regulator may not interfere with the existing operations of Fannie Mae's and Freddie Mac's automated underwriting system under the bill approved by the House Financial Services Committee.The committee chairman, Rep. Michael Oxley, R-Ohio, has included language in the regulatory reform bill (H.R. 1461) that specifically protects the AU systems in order to fend off attempts to strip a "bright-line" test from the bill. The bright-line test requires the new government-sponsored enterprise regulator to draw a line between permissible GSE activities and lender activities. Supported by the Mortgage Bankers Association, this bright-line test is supposed to keep the GSEs out of the mortgage origination business and promote competition among AUS providers. However, many midsize and small lenders are afraid this test could block their access to the GSE AU systems. No amendments were offered at Wednesday's mark-up to weaken or eliminate the bright-line test. However, Rep. Oxley said he would include additional language in the bill to clarify that Fannie and Freddie can continue to offer and update their AU systems.