Housing Finance Reform will have to Wait Longer for its Hearing

Banker Resource
October 3, 2013 — 1,311 views  
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While the House of Representatives was outlining its agenda for the next two months of floor hearing, the market learned that the housing finance reform did not make it to the priority list of the policymakers. This suggests that no government-sponsored enterprise bill will be considered by the House at least not until the end of the year. This has thrown light on the fact that the officials are still facing problems in bringing a reform in the sustainability of the system of mortgage finance.

Further, Chief Executive and President of Financial Services Roundtable Timothy Pawlenty, recently clarified that the housing finance reform has less chances of being passed before the mid-term elections of 2014.

Reaction to the Delay

Analysts for Keefe Bruyette & Woods, Michael Michaud and Brian Gardner, explained that the reason for the GSE reforms losing out on the list is the presence of dominant issues like budget, Syria and debt ceiling. They also added that in their view, the busy calendar might have made it challenging to fit in a date for the debate of Protecting American Taxpayers and Homeowners Act.

Policy analyst for Compass Point, Isaac Boltansky too has somewhat similar thoughts on this matter. He said that though there is expected to be a considerable amount of discussion on this issue in the House in coming fall, it is unlikely that any meaningful movement will be seen in this direction. He further added that it is expected that the housing industry will fight against the PATH Act as it will reduce the role of government in mortgage market significantly. 

Lack of prioritizing this reform by the House has led to believing that any form of modification efforts over the mortgage finance system will be at the backseat for the rest of the year.

Suggestions for Dealing with the Present Situation

Co-founder and CEO of NewOak, Ron D’Vari, said that this delay is likely to have an impact on the banking system. He suggested that the goal for the mortgage market should be to open up to private money investors who can help out by learning to invest gradually in the mortgage credit market.

But doing this will also require a high level of risk management. Apart from that, it will also require underwriting tools. Both these issues are quite critical taking into consideration the condition of the market.

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