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Housing Bill Inches Forward in Senate; Questions Arise Over Fannie, Freddie's Role

A sweeping mortgage reform and housing aid package stalled in the Senate was able to only inch forward late Monday, with members of the Senate voting 76-10 late in the evening to take the next procedural step needed to move the bill forward. The passage of the housing bill has slowed to a crawl and remained there Monday even as the Senate resumed work on the bill after a July 4th recess, with Sen. John Ensign (R-NV) making good on his threat to hold up the package over an $8.2 billion non-housing-related amendment tied to renewable energy tax cuts that he wants to see tacked onto the so-called Foreclosure Prevention Act of 2008. Some Senators said that the way the House sent the bill to the Senate for consideration left it open for the sort of stall tactics Ensign is taking advantage of. "You need a Ph.D. in parliamentary procedure because of the way the House sent the bill over," Chris Dodd (D-CT), chairman of the Senate Committee on Banking, Housing and Urban Affairs, is quoted as saying in a report in Monday's Congressional Quarterly. "The way they sent it over created all these steps . . . one person who wants to make you go through it can make you go through it." In essence, the Senate is forced to hold votes to invoke cloture -- a measure that limits debate on a paritcular issue -- at each step in the parliamentary procedure, as it looks to make an attempt to pass the bill. The number of steps, and associated delay should Ensign force the Senate to invoke cloture at each turn, threaten the passage of the housing bill before Congress adjourns its current session; sources told HW Tuesday morning that "it's fifty-fifty" that the bill makes it through in time. Questions bubble up over GSEs capacity Among the housing package's key provisions is language that would expand the Federal Housing Administration's authority to endorse refinancing activity among troubled borrowers by $300 billion, with the funding for such an expansion contributed by Fannie Mae (FNM) and Freddie Mac (FRE). According to an estimate released June 9 by the Congressional Budget Office, however, the proposed measure would cost both GSEs $9 billion over the next 10 years, with roughly $710 million of that total coming in 2009. Shares in both Fannie and Freddie were pummeled Monday over concerns that both face rising liabilities that would require substantial additional capital; in particular, a Lehman analysts' report suggested that both GSEs would need to raise as much as $75 billion. Yesterday's drubbing of the GSEs' stock has led some on Capitol Hill to privately question whether either GSE is in a position to assume responsibility for funding the proposed expansion of FHA lending, according to HW's sources. Whether such a concern is ultimately expressed during debate the Senate floor publicly is a separate issue, we were told. "I'm not sure any U.S. Senator wants to find themselves in a position that implies that the GSEs are too capital-constrained to help," our source said. "At least, certainly not publicly, not right now." Concerns over the role of Fannie Mae and Freddie Mac aren't the only hurdles that remain for the housing package, even if the Senate can push it through in enough time. Significant differences remain between the House and the Senate versions of the bill, and while Dodd and House Financial Services Committee chairman Barney Frank (D-MA) are said to be working on a compromise measure behind the scenes, it remains to be seen if those differences will be a further point of contention. In particular, Congressional Quarterly reported Monday that the two sides of Congress remain divided over a proposed $14.5 billion package of housing-focused tax breaks. House lawmakers want the entire tax package paid for, according to a report by the news agency, but the Senate measure falls $2.4 billion short of that goal. Both Frank and Dodd are also not in agreement over a proposed measure to set a permanently-increased conforming limit. The House measure wants to set the limit in high-cost areas to $729,500, while the Senate measure would ink a lower price point. Disclosure: The author held no positions in FNM or FRE when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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