An overhaul of the housing finance system looms large for the Republican-controlled Congress over the next two years.
A legislative deal could end a six-year battle over eliminating Fannie Mae and Freddie Mac, which back $5 trillion in mortgages and needed nearly $190 billion in taxpayer help to stay afloat after the 2008 financial crisis.
{mosads}Sen. Richard Shelby (R-Ala.) is poised to take over the Senate Banking Committee and has expressed a willingness to move legislation. But he faces a series of challenges.
He’ll be under pressure to craft legislation similar to a measure backed by conservatives and crafted by Texas Republican Rep. Jeb Hensarling that dramatically reduces the government guarantee behind Fannie’s and Freddie’s loans.
“I don’t want any explicit guarantee,” Shelby said.
But even with Republicans in control of the Senate, Shelby said he will need bipartisan support to win President Obama’s support.
“We’ll see what’s doable,” Shelby said.
Shelby has signaled that he is unlikely to rely on the ground work laid out in two bills — one by Sens. Mark Warner (D-Va.) and Bob Corker (R-Tenn.) and another by Senate Banking Committee Chairman Tim Johnson (D-S.D.) and Sen. Mike Crapo, the panel’s top Republican.
The Johnson-Crapo measure was approved by the Banking panel in May but stalled out after that.
Sen. Sherrod Brown (D-Ohio), who is poised to become the panel’s ranking member, said recently that he would push for a fresh effort and would avoid using the Johnson-Crapo bill as a foundation.
Sen. Bob Menendez (D-N.J.), a Banking panel member who is another possible candidate for the ranking member slot, questioned what could happen under Republican control in the next Congress.
“What will be more interesting in the next Congress is not whether a reform deal can be reached but whether those who want to slay the GSEs while leaving nothing in return, whether they’ll have the day or they’ll have the leadership to make that happen,” he said.
Shelby’s and Brown’s views are far apart on major components of what should be included in a comprehensive bill. While Shelby wants to end the government guarantee, Brown wants to win provisions to help poor families get credit to buy homes.
Housing industry experts argue there may be ways to appease both sides by looking more closely at where a government guarantee would apply while also drilling down on the best way to ensure that lower-income families and minorities can gain access to mortgage credit.
Still, while hopeful for some kind of deal, housing experts say it is hard to imagine that outcome. And they say the lack of one is holding back the economy.
Jerry Howard, head of the National Association of Home Builders, said the uncertainty created by the administration’s limited ability to keep Fannie and Freddie in the black amid congressional inaction is “reflected in how slow this recovery has been.”
“So, I hope that Mr. Shelby, when he becomes chairman, will heed his own advice and work toward a bipartisan solution on this because we are very desperately in need of it,” Howard said.