GSEs Taking Back Seat To Bill Going Nowhere

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WE’RE HEARING that it’s doubtful a FHA reform bill will be approved by either the House or Senate banking committees before the August recess.

There seems to be general agreement on Capitol Hill that reforms to the Federal Housing Administration single-family program should be passed first before taking on GSE reform.

But there seems to be little movement on either the House or Senate side. And industry groups are growing skeptical about the prospects for a FHA reform bill as we get closer to the summer solstice.   

In terms of being productive legislatively, this would be the best time to act. The fall session will be crammed with spending bills and the upcoming fight over increasing the debt ceiling.

At the beginning of the year, Senate Banking Committee chairman Tim Johnson, D- S.D., and Sen. Mike Crapo, R-Idaho, agreed to work on a FHA reform bill.

It appears this bipartisan agreement is still in effect but lobbyists are disappointed that they have not been able to obtain any drafts of the provisions. 

On the House side, House Financial Services Committee chairman Jeb Hensarling, R-Texas, is still trying to get his fellow Republicans to agree on a bill that will scale back the FHA mortgage insurance program.

Rep. Hensarling and other senior Republicans want to reduce FHA loan limits and restrict eligibility to first-time homebuyers and low- and moderate-income borrowers. 

They also would like to reduce the 100% federal guarantee on FHA loans, which will rile up the Realtors, homebuilders and mortgage bankers. Rep. Hensarling is concerned junior GOP committee members might join the Democrats and vote against such provisions. 

As a rule, committee chairmen don’t put out a bill unless they know it will pass.   

So that appears to be the status of FHA reform bill. It appears to be going nowhere fast. For the housing lobby, that is not such a bad thing. But FHA would be the loser. FHA officials have been seeking major changes to enhance their enforcement powers to better police lenders and streamline management of the program.   

The House passed a bi-partisan FHA reform bill last year that the agency wanted very badly.  But it died in the Senate at the end of the legislation session. Sen. Johnson made a last-ditch effort in December to bring the FHA reform bill up for a vote. But GOP senators blocked it on the grounds that the measure had not been approved by the Senate Banking Committee.

JUST WAIT until mortgage interest rates hit 5%, say our Monday morning economists at the Mortgage Grapevine. People will be looking for creative financing, alternate structures: they’ll be looking for mortgage brokers, in a word, say our Viners. Subprime, alt A, stated income, NINA, neg-am, pick a payment, these were all words we put up on a shelf in the hope they wouldn’t be used again. Guess we hoped too soon.

MOST READ / MOST E-MAILED: Brian Collins’ story on economists forecasting housing adding to national recovery next year. Gee, you guys, are you sure you want to go that far out on a limb? The most e-mailed content was Brad Finkelstein’s piece on wholesale subprime. More and more people are using the S word these days!

BLOG OF THE WEEK: According to John McDermott, too many people are “under paper” on their mortgages. Is he blogging about the electronic mortgage? Not really. He’s talking about when people try to close a mortgage until they find out there has been no lien release on their previous mortgage. Even if they’ve made every payment. John’s a closing attorney who has represented both borrowers and lenders, so we guess he knows what he’s talking about!

LOOKING FORWARD: The good folks at American Enterprise Institute down in the Capital District have invited Mark Fogarty to again participate in their housing bubble series, a twice-yearly event that is slated for Oct. 15 or Oct. 17 this fall. We’ve been to this seminar four times in the past, so we guess they like me, they really like me, and are looking forward to going back. It is run with a minimum of ideological fervor, which suits the token liberal on the panel! The series is run by AEI fellow Alex Pollock, a former president of the Federal Home Loan Bank of Chicago.

Mark Fogarty is editorial director of the SourceMedia Mortgage Group and has been commenting on the mortgage market since 1984. Brian Collins is the group’s senior editor and D.C. bureau chief. He has worked the mortgage beat since 1988.