Hearing of U.S. Senate Committee on Banking, Housing, and Urban Affairs "Executive Session - Mark-up"

Hearing of U.S. Senate Committee on Banking, Housing, and Urban Affairs "Executive Session - Mark-up"

Today, the Committee will consider a number of nominations and legislative matters, including Housing GSE reform legislation. Unfortunately, I suspect that this legislation will not garner the wide bipartisan support that I had hoped for. I would venture to guess that every member of this Committee believes that the regulatory structure we have in place today is insufficient. And, we all realize the value of the GSE's and their role in providing liquidity to our home mortgage markets.

However, broad consensus has not yet developed regarding the details of a new regulatory structure. I believe that this lack of consensus on the details reflects the extraordinary complexity and difficulty of this issue. We have had a healthy debate on this issue in the Committee this year, and have bridged the gap on many issues that divided us last year. This has been very positive but, unfortunately, many differences still remain many. Nonetheless, today's mark-up is an important step if we are to consider Housing GSE legislation this year.

For now, I just want to note the commitment and energy that my colleagues have brought to this debate to date. I look forward to working with them as the process continues, and it is my hope that greater consensus may be achieved so that Congress may pass strong legislation this year.

My legislation creates a new regulator with combined oversight authority for both the safety and soundness and the housing mission of Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System. The new regulator will have general regulatory authority over all Housing GSEs, including enhanced authority over capital requirements, and enforcement and prompt corrective action authorities that are comparable to those of the bank regulatory agencies.

Among other enhanced regulatory authorities, the bill we will consider today includes clear direction on portfolio review for compliance with safety and soundness, mission and systemic risk. Under this proposal, the enterprises are permitted to hold those assets which promote the enterprises' mission in the housing market.

The bill also transfers the product review function from HUD to the new regulator and creates a two-tier approval process through which the enterprises must receive approval prior to offering any new product, except for the automated underwriting system and modifications to mortgage terms and conditions and underwriting criteria. The bill also establishes new criteria for approval of a product that will ensure that the enterprises remain focused on their statutory mission of facilitating a secondary mortgage market.

The new regulator will also have the power to conduct an orderly resolution of a failing or insolvent GSE through a receivership process. This clear and definitive process for dealing with a troubled enterprise is a critical tool for the credibility and strength of a new regulator.

I recognize that my colleagues and I share common ground on many points. Unfortunately, there are several issues on which we cannot reach bipartisan agreement. As this bill moves forward, I hope to continue working with Senator Sarbanes and the other members of the Committee.

It is my hope to move legislation this year if it creates a strong, credible regulatory framework for the Housing GSE's.

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