Leaders of the U.S. Senate Banking Committee had pledged 2013 was the year to complete a measure to shrink the federal role in housing finance. Now they are looking forward to next year.
Senate Banking Committee Chairman Tim Johnson and ranking Republican Mike Crapo said today that they have been unable to meet a self-imposed goal for the panel to approve a bipartisan bill this year. House Financial Services Committee Chairman Jeb Hensarling convinced his panel to approve his housing-finance proposal while failing to get enough support for a floor vote.
As the year moves to a close, the Senate lawmakers say they remain optimistic a housing-finance overhaul will eventually happen. Johnson said today that he remains “bullish” on the outlook.
“Reform efforts have progressed at a rocket pace over the past year but now that lawmakers have advanced the discussion beyond generalities and into specifics, the complexities and ideological divides that define this debate have reemerged,” said Isaac Boltansky, an analyst at Compass Point Research & Trading LLC in Washington.
Johnson, a South Dakota Democrat, had pledged in September to offer a housing measure this year while Crapo, a Republican from Idaho, promised a committee vote on a measure this year. The panel has been unable to introduce legislation.
The Senate panel held 12 hearings on housing reform this year. Johnson and Crapo are attempting to produce a bipartisan bill that builds on legislation by Senators Bob Corker and Mark Warner to wind-down government-owned mortgage backers Fannie Mae and Freddie Mac while allowing for a federal backstop for lending in a crisis.
“We are not as far along in the committee process as I had originally hoped we would have been at this time,” Johnson said today at a Bipartisan Policy Center event. “We were thrown a couple of curveballs over the last few months including a 16-day government shutdown and a couple of weeks of unanticipated congressional recess.”
Johnson said he remains “bullish” on the committee’s chances to move forward on housing-finance reform. He refused to put a new timeline on releasing a bill.
Any measure offered in the Senate would need to be reconciled with a Republican measure in the House that goes beyond the Corker-Warner bill in limiting the government’s housing-finance role. Next year’s congressional calendar also is complicated by midterm elections.
“I have trouble believing that House leadership would put the bill to a vote on the House floor in advance of the midterm elections given that it will surely anger the housing industry,” Boltansky said.
Jaret Seiberg, an analyst at Guggenheim Securities LLC’s Washington Research Group, said the outlook for housing reform is not yet “jeopardized.” He said if the Senate panel is unable to approve a bill by the end of February to clear the way for a full Senate consideration, then chances do dwindle.
“The first six weeks of 2014 will tell whether a bill can get done,” Seiberg said in an interview. “If it’s March and they are still debating what this bill should look like, we might never see housing-finance reform.”
The government seized Fannie Mae and Freddie Mac after the mortgage-finance companies were pushed to the brink of bankruptcy by investments in bad loans. The companies took $187.5 billion in taxpayer aid before reporting record profit this year as the housing market rebounded.
Yesterday the Senate confirmed Representative Mel Watt, a North Carolina lawyer who has served in the House since 1993, to lead the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac.
Watt, 68, was confirmed on a 57-to-41 vote less than three weeks after Senate Democrats changed the chamber’s rules to let nominations pass with a simple majority. Under the previous rules, Republicans blocked Watt and other nominees from advancing.
Watt will be in a position to set and modify terms for the 50 percent of U.S. mortgages owned or backed by Fannie Mae and Freddie Mac. He’ll replace FHFA Acting Director Edward J. DeMarco, a career bureaucrat who has focused on improving the companies’ bottom line and conserving assets for taxpayers.