Housing Finance Reform Links

I mentioned on Saturday that the Department of Treasury has released three recommendations for housing finance reform, impacting Fannie Mae and Freddie Mac. They've sent out a press release summarizing the report.

“This is a plan for fundamental reform – to wind down the GSEs, strengthen consumer protection, and preserve access to affordable housing for people who need it,” said Treasury Secretary Tim Geithner. “We are going to start the process of reform now, but we are going to do it responsibly and carefully so that we support the recovery and the process of repair of the housing market.”

The actual report is also on their website. My concern is that it emphasizes the need for strong regulatory oversight.

Going forward, the government’s primary role should be limited to robust oversight and consumer protection....private markets – subject to strong oversight and standards for consumer and investor protection –....In addition to fully implementing the reforms in the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) (Pub. L. 111-203), the Administration will mobilize all tools available to address the nation’s broken system of mortgage servicing and foreclosure processing....

Historically, in any industry, people have opposed regulatory oversight of their businesses.  So some of the reforms and oversights that the Obama Administration is attempting to implement almost certainly will be opposed by lenders and their allies in the Congress (in both parties).  Part of this depends on the successful implementation of the Dodd-Frank Act, which was opposed by the Republicans in Congress, and the funding to implement it is far from certain with the Republicans in control of the House, especially with the deep budget cuts proposed by Representative Paul Ryan.

A source of conflict as the proposals move into the Congress for delibration is almost certainly going to be what was the causes of the housing finance market collapse.  CRA requirements and affordable lending has been a scapegoat for some, despite data showing otherwise.
 
It will be interesting to see how strong the regulatory oversights are after the reform has been completed, and how effective it will be over time.  I bet it will be quite a challenge to recouncile the House and the Senate versions of the reform.  Keep in mind while the Republicans control the House, the Democrats control the Senate by a small majority, with President Obama wielding the mighty veto pen.