Senate Banking Committee Chairman Richard Shelby (R-Ala.) said the federal government has to reduce the investment portfolios of Freddie Mac and Fannie Mae – either in legislation or through regulation.
But passage of a bill revamping the regulation of the government-sponsored enterprises (GSEs) has grown less certain than at the end of 2005, when it seemed nearly a done deal. The Federal Housing Finance Reform Act of 2005 (H.R. 1461) passed the House overwhelmingly in October. But efforts to get the Senate to vote on a version of the bill were derailed in December over disagreement with the House version’s inclusion of an affordable housing fund paid for by 3.5% of Fannie and Freddie’s profits. The House version did not mandate that the GSEs reduce their investment portfolios, which senators such as Shelby believe have grown too big for comfort.
Shelby said he expects the legislation to pass the Senate in 2006, but experts don’t predict passage early in the year. One reason is that GSE reform is no longer the top priority for the banking committee. Overhauling the nation’s flood insurance program has emerged as a major challenge in the wake of the hurricanes that devastated the Gulf Coast in August and September 2005. In addition, Congress delayed convening in early 2006, attributed by some in Washington to the turmoil among the Congressional leadership.
If the Senate fails to act by early July, then “GSE legislation is as close to dead as you can get,” Brian Gardner, research analyst at investment bank Keefe, Bruyette & Woods, told Reuters.
In other GSE news
HSBC becomes DUS lender
HSBC Bank USA, N.A., was approved to become a Fannie Mae Delegated Underwriting and Servicing (DUS) lender. Glenn Grimaldi, senior vice president and national production manager for HSBC’s commercial real estate division, will oversee its DUS activities.
The bank plans to build its DUS business by directly sourcing its client portfolio, offering “one-stop shopping for our growing client base,” according to Richard DeZego, HSBC senior executive vice president and head of commercial real estate operations in the U.S.
Freddie Mac makes big Gulf Coast buy
Freddie Mac announced in late January that it was buying $40 million in tax-exempt bonds issued by the Mississippi Home Corp. The bonds will support low-cost mortgages for an estimated 350 hurricane victims. The interest rates on the loans will be a quarter percentage point below market rates, according to Patricia Cook, Freddie Mac’s executive vice president of investments and capital management. The low rate is enabled by the GSE’s purchase of the bonds “for our investment portfolio,” she said.
