Prior to President Trump signing a memorandum today requiring Treasury and HUD to develop housing finance reform plans, Senate Banking held the second of its two-part hearing series on Chairman Crapo’s (R-ID) GSE reform outline.  Sen. Warner (D-VA) cited the memorandum as a reason for Congress to act. The committee continued to grapple with the merits of a multi-guarantor system and national footprint requirements (see Client Report GSE141), but today also considered whether utility regulation should be pursued.  Ranking Member Brown (D-OH) endorsed it, specifically calling for guarantors to have regulated rates of return.  The GSEs have already been directed by FHFA to set g-fees to achieve ROEs that FHFA determines to be appropriate. While Chairman Crapo sought witness views on utility-style regulation, his outline does not endorse it, instead requiring FHFA to approve guarantors’ pricing levels.  Sen. Warner suggested taking an “interim step” towards utility-style regulation by providing more support for low and moderate income borrowers and strengthening the common securitization platform.

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