After hammering out a bipartisan agreement yesterday, The U.S. Senate Banking Committee voted in a 19 to 2 landslide to approve a housing relief package that would expand the government’s role in helping troubled homeowners, and provide a new regulator for Fannie Mae (FNM) and Freddie Mac (FRE). The sweeping bipartisan approval of the Senate proposal comes as a victory for Committee chairman Senator Chris Dodd (D-CT), who had worked incessantly with Senator Richard Shelby (R-AL), the ranking Republican on the banking committee, to hammer out an agreement over the proposal. The bill now heads to the full Senate for consideration; Dodd has said he expects to have a bill in front of President Bush to sign by July 4. Beyond GSE reform — a long-stalled measure in Congress, which Democrats included in the housing package in part to win Republican support for a proposed expansion of FHA lending — the Senate version of the housing relief package would backstop a $300 billion expansion of the Federal Housing Administration’s mortgage insurance program with allocations from a GSE-sponsored affordable housing fund. Initial Republican resistance to the proposal had stemmed from its expected multi-million dollar direct cost to U.S. tax payers, which President Bush said constituted a bail-out of irresponsible lenders and borrowers. Sources on Capitol Hill told Housing Wire Monday that the Senate agreement was implicitly approved by the Bush administration, signaling a potential softening of the President’s stance to the measure. The President had originally issued a veto threat last week to a similar measure pushed through the House by Financial Services Committee Chairman Barney Frank (D-MA).
The entire affordable housing fund would be allocated to the FHA rescue program in 2009, under the bipartisan Senate plan, scaling down in subsequent years through 2012. Under the proposal included in both the House and Senate bills, the GSEs would required to set aside 4.2 basis points per dollar of unpaid principal balance on new loans purchased for the fund. Any leftover dollars not used by the FHA would be allocated for the housing fund’s original purpose, under the terms of the Senate proposal. Fight on affordable housing “brewing” While the Senate compromise represents a landmark bipartisan agreement, Barney Frank suggested Monday evening that he opposed the use of affordable housing funds as a backstop for the FHA expansion measure. “A fight is brewing on the affordable housing trust fund,” the Massachusetts Democrat said in a speech, Reuters reported. The Massachusetts Senator, who has threatened servicers with tougher legislation if they fail to refinance borrowers into FHA-backed loans, made it clear in remarks Monday that the agreement between Dodd and Shelby didn’t extend to House Democrats. The use of affordable housing funds to pay for FHA expansion “would be one of the most contentious issues between us … so we will deal with that,” he is quoted as saying. Assuming Dodd’s proposal clears the Senate this week, members of the House and Senate would need to hammer out a compromise bill before sending it to President Bush for consideration. Frank suggested that despite his strong feelings on protecting affordable housing funds, he expected a package would be sent “soon” to the White House. Disclosure: The author held no positions in FNM or FRE when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
