Three key Republicans on the Senate Banking Committee have introduced a GSE bill that they hope will serve as the model for legislation to tighten the regulation of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.Co-sponsored by Sens. Chuck Hagel (Neb.), John Sununu (N.H.), and Elizabeth Dole (N.C.), the bill (S. 190) would create a new regulator for the three government-sponsored enterprises with the power to raise capital requirements, disapprove new products, and place a failing GSE in receivership. The bill contains the essential elements of GSE regulatory reform that the Bush administration demanded last year. The three senators introduced a similar GSE bill last year. But this year they added new requirements for annual audits of Fannie's and Freddie's affordable housing programs, limits on investments in nonmission assets (such as tobacco bonds), and mandatory reporting of fraudulent loans. S. 190 would also allow the GSE regulator to establish parameters for primary and secondary activities, which the Mortgage Bankers Association supports. "The legislation draws a needed bright line between primary and secondary markets, which will empower the regulator to keep Fannie and Freddie focused on their mission," said MBA's top lobbyist, Kurt Pfotenhauer.

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