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The summer of mortgage finance? To fix the nation’s housing system, Congress must seize the moment

Congress is back from the July 4th recess, and members seem ready to finally tackle mortgage finance reform. Although other issues certainly crowd the agenda, there is enough activity in both Houses of Congress and from members in both parties to create some momentum. When thinking ahead, there are two questions: why would Congress act on mortgage finance now, and if it does, how will action proceed?

Why now? Unsurprisingly, the answer is money. Fannie Mae and Freddie Mac are now generating revenue, which would help to ease any transition by creating a way to build up reserves. Waiting, however, is tricky, because that revenue is flowing to the Treasury. The longer the federal government relies on that additional revenue, the harder it will be to give it up (four Senators have already acknowledged this in legislation). Congress should act quickly before it gets hooked.

What’s next? Action will come in parallel. The Senate Banking Committee will start with legislation on FHA, then likely move to the Corker-Warner proposal to replace Fannie Mae and Freddie Mac with an insurance model. House Financial Services will likely focus on a privatized approach that would have trouble attracting support across the aisle. Bipartisan efforts in the Senate will be the best place to work out a plan that could pass.

It’s been six years since the financial crisis began, and five since the federal government placed Fannie Mae and Freddie Mac into conservatorship. The issue is surely ripe—let’s hope Congress can pluck it from the vine.

This article originally appeared in the July 2013 issue of Under One Roof, the monthly newsletter of the National Housing Conference and Center for Housing Policy, in Ethan Handelman’s monthly Policy Workshop column. To subscribe and be eligible to be featured in Under One Roof, join NHC today.

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