For Second Time, Baker Introduces GSE Reform Bill, Oxley Among Original Co-Sponsors

WASHINGTON – Rep. Richard Baker (R-La.) is taking a second stab at getting legislation passed that overhauls the regulation of the housing Government Sponsored Enterprises. Bolstered by the Fannie Mae accounting mismanagement scandal which came to light on the heels of a similar prior situation at Freddie Mac, the chairman of the House Capital Markets, Insurance, and Government Sponsored Enterprises Subcommittee introduced “The Federal Housing Finance Reform Act of 2005″ on April 5. Baker’s first bill – H.R. 2757, the “Secondary Mortgage Market Enterprises Regulatory Improvement Act” – which he introduced in July 2003 made it as far as a Subcommittee hearing in September 2003. In April 2004, the Senate Banking Committee marked up similar legislation drafted by Chairman Sen. Richard Shelby (R-Ala.) and ranking member Sen. Paul Sarbanes (D-Md.). Although their measure garnered a good number of co-sponsors the bill didn’t make it out of that committee either. Among the provisions of Baker’s Federal Housing Finance Reform Act of 2005, it: * establishes the Federal Housing Finance Agency (FHFA) as an independent agency to regulate Fannie Mae, Freddie Mac, and Federal Home Loan Banks; * the FHFA has the authority to approve new programs. * the FHFA establishes housing goals and an annual home purchase goal for Fannie Mae and Freddie Mac. It can take enforcement action against a GSE for failing to meet the housing goals; * the FHFH can issue cease and desist orders; remove officers, directors, and affiliated parties; and impose civil money and criminal penalties. It also has the authority to remove management; * Presidential appointed board directors for Fannie Mae and Freddie Mac are eliminated; * the Office of Federal Housing Enterprise Oversight (OFHEO) is abolished within one year and functions are transferred to FHFA; * the Federal Housing Finance Oversight Board (FHFB) is also abolished within one year and functions are transferred to FHFA. House Financial Services Committee Chairman Michael Oxley (R-Ohio) commended Baker on introducing the measure. In a prepared statement, Oxley said, “I think we have to remember how much the secondary mortgage market has changed since Congress chartered the government-sponsored enterprises. The markets have expanded, the GSEs have grown dramatically both in their size and in their scope.The agency that regulates the GSEs, however, has not changed and has not been given the powers it needs to oversee these complex institutions. This is a serious issue we hope to address this Congress.” Oxley added that, “We are building a new agency from the ground up, and this bill provides a solid foundation.” NAFCU President/CEO Fred Becker also voiced the association’s support of Baker’s bill in separate and identical letters – one to Oxley, Baker and Ranking House Financial Services Committee members Reps. Barney Frank (I-Mass.) and Paul Kanjorski (D-Pa.), and another to Sen. Richard Shelby (R-Ala.), chairman of the Senate Banking, Housing and Urban Affairs Committee, and Sen. Paul Sarbanes (D-Md.), ranking Committee member. Although generally supportive of Baker’s bill, Becker did raise some areas of concern to NAFCU, particularly the “bright line” test provision. “While the underlying rationale for the bright line test might work in the abstract, NAFCU believes it would wreak havoc in the real world of mortgage finance – particularly in the world of mortgage finance in which credit unions and other small and mid-sized lenders operate.” As a result, stated Becker, “competition would decrease as many credit unions would likely need to withdraw from the mortgage market.This is contrary to the mission of the GSEs and has no place in legislation governing their regulation. According, we strongly urge you to reject it.” Becker also addressed provisions in Baker’s measure concerning prior approval of programs, products and activities – they “should be allowed to move forward from concept to implementation without the need for public notice and comment and without explicit agency approval” – and limits on GSEs’ portfolio growth – “NAFCU urges Congress to exercise restraint in imposing such limits.” -