Washington, D.C.–In recent months, the U.S. House of Representatives has seen a number of bills introduced to reshape public involvement with the nation’s mortgage market, with more expected. Considering that the chamber has a Republican majority, it’s little surprise that most of the measures involve phasing out Fannie Mae and Freddie Mac, which have needed taxpayer bailouts to the tune of about $138 billion.
So it was something of a surprise when Rep. Gary Miller (R-CA) said late last week at a National Housing Conference policy confab that the bill he plans to introduce after the Independence Day holiday would replace the GSEs with a new, consolidated entity whose function would be very much like Fannie and Freddie. Though Miller didn’t offer many details about his plan, presumably the new entity would buy mortgages, package them and sell bonds to investors–all with government guarantees.
“If you want to hurt taxpayers, cut off the lending market,” Miller said in a speech at the meeting. “If you want to hurt the housing market, eliminate the GSEs without providing a viable alternative.”
The bill is unlikely to get much traction in the House, considering that the leadership in the chamber is publicly committed to replacing the GSEs with nothing. Even the Obama administration called for the elimination of Fannie and Freddie earlier this year, reducing “the government’s footprint in the housing market,” as Treasury Secretary Timothy Geithner put it in February. The administration’s proposals for the GSEs did, however, leave open the possibility of government backing for mortgages in times of crisis or government guarantees for a targeted range of mortgage investments.
Also at the National Housing Conference event, Jeffrey Goldstein, the Treasury Department’s undersecretary for domestic finance, said that the Obama administration is mulling concerns on the proposed risk-retention rule drafted by federal regulators to fulfill provisions of the Dodd-Frank Act. “We are seriously considering feedback and are committed to getting this rule right, so that we can ensure securitization is a stable and reliable source of credit for consumers, businesses and homeowners,” Goldstein said in the keynote speech.
The proposed rule includes a new definition for qualified residential mortgages (QRM), which are loans exempt from the risk-retention requirement. The underwriting standards for QRMs laid out in the proposal include a required 20 percent down payment, strict debt-to-income ratios, and borrower credit history restrictions. Public comments were originally due on June 10, but in the wake of criticism from housing and industry groups (including the National Housing Conference), regulators extended the comment period until Aug. 1.