FEDERAL LEGISLATION
REFORM EFFORTS
As Congress considers regulatory reform of GSEs, DFWAMB strongly urges Congress to consider the impact this legislation could have on the stability and innovativeness of our highly successful mortgage finance system.
Brightline Test - DFWAMB is adamantly opposed to the so-called 'bright-line' test being proposed in Congress. On its face, this proposal would prevent Fannie Mae and Freddie Mac from participating in activities unless they are determined to be a secondary market activity. The 'bright line' proposal would prevent a mortgage broker's ability to directly access the GSEs' automated underwriting systems. Prohibiting mortgage brokers and other small lenders from accessing the GSEs' automated underwriting systems will create an imbalance in the mortgage market that allows only a few large lenders with their own automated underwriting systems to dominate the lending industry.
INNOVATIVE PRODUCTS - DFWAMB is particularly concerned that increased regulatory reviews will inhibit innovation. DFWAMB believes that innovation should not be held hostage to unrestrained regulatory reviews. Fannie Mae and Freddie Mac should be able to bring innovative products to the market quickly to meet the ever-changing needs of mortgage borrowers. Requiring a review of every new initiative or activity would unnecessarily delay innovation.
PORTFOLIO LEVEL LIMITS - DFWAMB believes GSE mortgage portfolios hold down mortgage costs and make the national mortgage market more liquid and stable. Their issuance of debt securities gives them access to a wide range of investors. Many investors, particularly those outside the US, prefer debt securities to MBS. International investors are often less familiar with 30-year fixed-rate mortgages and they often do not want to assume the prepayment risk of a mortgage-backed security.
STATUS/OUTLOOK>
Senator Chuck Hagel (R-NE) introduced legislation, S.190, to increase regulatory oversight of the GSEs. It is anticipated that Senator Richard Shelby (R-AL), as well as Congressmen Richard Baker (R-LA) and Michael Oxley (R-OH), will introduce GSE reform legislation in the early spring.
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