This week promises to deliver some long-anticipated news on key housing-finance issues.
The release of the Volcker Rule on Tuesday will determine the extent of further regulation in response to the London whale incident, and whether the current July 2014 deadline will be extended to mid-2015.
According to Compass Point Research & Trading Group, "All signals point to regulators extending the current July 2014 deadline to mid-2015 so long as banks demonstrate a ‘good faith’ effort to begin implementing the rule."
However, the research company says they "remain concerned" that regulators are committed to curtailing portfolio/macro hedging in response to the London whale incident.
The other biggest story of the week is likely to be the confirmation of Rep. Mel Watt, D-N.C., to head the Federal Housing Finance Agency. The vote could happen as early as Tuesday, and the change in the Senate rules that don’t require a supermajority to break a filibuster mean that his confirmation is "a foregone conclusion," according to Compass Point.
As reported previously on HousingWire, a Watt-led FHFA is likely to lead to more principal reductions and an expansion of HARP refis.
This week marks the 'soft' deadline for the Congressional Budget conference committee to come up with a budget compromise.
The committee’s deadline is this Friday, Dec. 13, but with no immediate penalty for going beyond that date, Compass Point sees only a budget framework getting announced this week.
"Our sense is that the budget conference committee chairs are likely to announce the framework of a deal this week but we simply do not see a political catalyst that would result in a broader agreement being announced until January," Compass Point said.
A budget deal has to be reached by the hard deadline of Jan. 15, and Compass sees some evidence that lawmakers will not increase GSE guaranty fees (G-Fees) as part of a budget agreement.
Other events to note this week include a meeting of the Financial Stability Oversight Council this afternoon, a Senate Banking Committee hearing on the role of credit risk transfers in the future housing finance system on Tuesday, and Treasury Secretary jack Lew’s annual testimony before the House Financial Services Committee on Wednesday morning.