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GSE reform legislation goes to House floor.

The House Financial Services Committee passed NAA/NMHC-supported legislation (HR 1427) on March 29 to create a new regulator for Fannie Mae, Freddie Mac and the Federal Home Loan Bank system.

Comparable legislation passed the full House in the last Congress but failed to pass the Senate.

Supporters are more confident that the measure will pass this year after a late 2006 decision by the Bush administration to drop demands that the measure include statutory limits on Fannie and Freddie's portfolios.

NAA/NMHC argued against portfolio limits because most GSE multifamily mortgage purchases are held in their portfolios.

Under the bill, if a new regulator writes rules controlling the GSE's portfolio growth, it could consider only factors affecting the companies' own safety and soundness.

The bill tightens the GSEs' affordable housing goals by only counting mortgages purchased on homes or rental units that are affordable to families at 80 percent of area median income, down from 100 percent. This likely will increase the GSEs' incentives to expand their apartment lending programs that already account for 30 percent of their qualified "affordable" activities.

The measure does include some restrictions on new product approval, which NAA/NMHC oppose and will seek to have altered in the Senate version of the bill.

The most controversial provision in the bill concerns an affordable housing fund that would require Fannie and Freddie to allocate an amount equal to 1.2 basis points of their total mortgage inventories to support rental housing for lower-income families.

For the first year, the funds would be used exclusively for the Gulf Coast area. The full House is expected to consider the measure following the spring recess.

Information compiled by NAA/NMHC Joint Legislative Staff: Senior Vice President for Government Affairs Jim Arbury; Vice President of Housing Policy Lisa Blackwell; Vice President of Capital Markets and Technology David Cardwell; Vice President of Operations and Risk Management Policy; Vice President of Communications Kim Duty; Vice President of Tax Jennifer Bonar Gray; Vice President of Environment Eileen Lee; Vice President of Building Codes Ron Nickson; Chief Economist Mark Obrinsky; and Senior Director of Employment Policy & Special Counsel Betsy Feigin Befus.
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Title Annotation:CAPITOL BEAT
Date:May 1, 2007
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