Senate Hearing Sets Stage for Housing-Reform Mark-Up

The Senate Banking Committee today held a remarkably well-attended hearing at which Chairman Johnson (D-SD), Ranking Member Crapo (R-ID), and senior Members from both sides of the aisle made it clear they plan to complete work on a version of Corker-Warner (see FSM Report GSE126) by the end of the year. Despite stalled action in the House, this signal continues the momentum building for action in this Congress on far-reaching reform of the U.S. housing-finance system. Apart from Sen. Toomey (R-PA), the panel appears to have reached consensus on the need for an explicit government guarantee to preserve the 30-year fixed rate mortgage through a liquid TBA market. Senators were, however, still divided on other issues, particularly Sens. Menendez (D-NJ), Warren (D-MA) and Shelby (R-AL), who disagreed sharply over the question of statutory downpayment criteria. Members also explored the more technical aspects of the proposed system, questioning the panel over potential sources of private capital and the depth of a first-loss tranche. Other issues discussed included multifamily housing, possible disadvantages for regional banks, and capital requirements. This report analyzes today’s hearing.

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