Slashing the pay of Fannie Mae and Freddie Mac executives would almost certainly lead to an accelerated brain drain and increased losses that would have to be covered by taxpayers, said the heads of the two government-sponsored enterprises and their regulator during hearings on Capitol Hill this week. It’s a tough sell. The House Financial Services Committee this week approved legislation to suspend bonus payments to top GSE officials and move Fannie and Freddie to a government pay scale. Federal Housing Finance Agency Acting Director Edward DeMarco appeared before the Senate Banking, Housing and Urban...

A significant drop in the FHA’s Mutual Mortgage Insurance Fund’s excess capital reserve has renewed calls for a smaller FHA and a limited government role in the mortgage market, even as opponents argued for the agency to remain on track and continue insuring high-quality loans. The annual actuarial report on the condition of the MMI Fund released this week revealed that the fund’s capital reserves dropped from 0.50 percent at the end of fiscal 2010 to 0.24 percent as of the end of September, the close of the government’s 2011 fiscal year. The program is required to have minimum capital reserves of 2.00 percent. The FHA was...

After years of on-again, off-again activity behind the scenes while the House of Representatives has repeatedly taken tentative steps toward creating a covered bond marketplace, the Senate finally got into the game with the introduction this week of legislation nearly identical to the bill introduced in the House earlier this year. On Wednesday, a small bipartisan group from the Senate Banking, Housing and Urban Affairs Committee introduced the “United States Covered Bond Act of 2011,” which is designed to create a legislative framework to expand funding options for U.S. financial institutions. Co-sponsors include...

Republican Sen. Bob Corker this week introduced legislation that would wind down Fannie Mae and Freddie Mac in part by limiting their new MBS issuance to a declining share of total new mortgage securitization. The Tennessee lawmaker’s Residential Mortgage Market Privatization and Standardization Act would “responsibly unwind” the government-sponsored enterprises by gradually reducing their portfolios of guaranteed mortgage-related assets while taking steps to bring uniformity and transparency to the housing market so that private capital can begin to replace the GSEs. The Corker bill would annually reduce the...

Industry groups are taking seriously new legislation introduced on Capitol Hill that would impose a tax on all securities trading activity, even if most observers see little likelihood of such “Robin Hood” tax legislation being enacted by a polarized Congress. Sen. Tom Harkin, D-IA, and Rep. Peter DeFazio, D-OR, last week introduced the Wall Street Trading and Speculators Tax Act, which would impose a 3 basis point tax on all non-consumer trading of securities, stocks, bonds, interests in partnerships and trusts, and derivative financial instruments. The tax would not be applied on new issuance or debt with...

Lawmakers on both sides of the aisle and both chambers of Congress are warming up the hot seat next week for the man in charge of the conservatorships of Fannie Mae and Freddie Mac as they demand answers following the firestorm surrounding bonus payments for top GSE executives.In advance of what is expected to be a heated set of hearings, Federal Housing Finance Agency Acting Director Edward DeMarco dispatched a letter to lawmakers late this week to provide his perspective after approving $12.8 million in bonuses for 10 Fannie and Freddie executives.

A bill introduced in the Senate this week would “responsibly unwind” Fannie Mae and Freddie Mac and “end the dependence on the government for housing finance.” Sen. Bob Corker, R-TN, said he introduced the Residential Mortgage Market Privatization and Standardization Act to start a conversation on how to best to rebuild the mortgage finance market.

Any proposed restrictions on asset-backed securities issuers, real estate investment trusts and other mortgage-related pools under the Investment Company Act would be harmful to the market and further restrict liquidity and capital formation, warned stakeholders. In comments to the Securities and Exchange Commission’s possible amendments to Rule 3a-7 and Section 3(c)(5) of the ICA, most stakeholders noted that the two provisions have worked well through the years to distinguish asset-backed issuers from investment companies, address investor protection concerns and allow the growth and innovation of...

The U.S. Supreme Court will determine whether disparate impact claims can be applied to the Fair Housing Act and lending discrimination cases by reviewing a Minnesota case involving rental housing. Although many fair lending cases based on disparate impact have been brought and settled over the years, the standard has not been universally interpreted by federal appeals courts. In Magner v. Gallagher, private landlords sued the city of St. Paul, MN, for enforcing its housing code, leading to claims by the landlords that shutting down their properties made it too difficult for minority renters to find...

The proposed bill that would increase standardization and uniformity in the mortgage securities market – without Fannie Mae or Freddie Mac – contains many worthy components, but it needs more details and further tweaking, according to industry experts testifying at a House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises hearing this week. The Private Mortgage Market Investment Act, drafted by Subcommittee Chairman Scott Garrett, R-NJ, would create a heavily regulated mortgage-backed securities market made up solely of private entities that would function with no federal...