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There are several bills looking to reform the housing finance industry, specifically Fannie Mae and Freddie Mac.

Most recently, the bipartisan proposal called Johnson-Crapo, is set for the legislative table. And so far, Johnson-Crapo is the most promising yet. It notably earned the support of trade groups, but has investors worried.

Goldman Sachs (GS) analyst Alec Phillips issued a warning this morning that the passage of most government-sponsored enterprise modification initiatives will lead to higher costs associated with mortgage origination.

This conclusion is based on the common theme in reform where the return of private capital is key to successful reform.

"While greater reliance on private capital has political appeal, it is apt to result in higher borrowing costs compared to the current federally backed system," Phillips said.

Phillips notes that Fannie and Freddie charged an average 0.38% guarantee fee to securitize mortgages last year. This failed to cover expected losses and an adequate return on capital, according to the Federal Housing Finance Agency.

Such a scenario is unacceptable to private capital, of course, which will demand a return.

"The assumptions underlying this analysis are not clear, and since then the fee has risen to a current average of around 0.55% per year so this gap may no longer exist, but if the heavy capital requirement under reform legislation were put into place fees would very likely need to rise further," Phillips adds.

Additionally, Phillips notes the Senate proposal would impose a 0.10% fee on mortgages guaranteed under the new system to finance the purchase or construction of affordable housing.

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