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Government & Industry Relations Update

Community Lenders and the Johnson-Crapo Bill
May 6, 2014

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The expected Senate Banking Committee consideration of the Johnson-Crapo bill to reform the nation's housing finance system hit a roadblock in late April when the sponsors postponed its markup.

A majority of the Committee members support passage of the measure, which among other things would provide an explicit government guarantee of mortgage-backed securities that meet certain underwriting standards and create a new government overseer of the mortgage industry.  However, the proponents of the bill are seeking to secure more votes in committee to provide momentum that could persuade Senate leadership to take it to the full Senate for a vote this year.

The measure would also craft specific roles for participants in the mortgage market such as originators, aggregators, and guarantors, and would create a small lender mutual cooperative to serve as a cash window for lenders with assets below $500 billion.

Community lenders, through the Independent Community Bankers of America, credit union organizations and others have been vocal about their concern that vertical integration would threaten the competitiveness of the small lender mutual cooperative.  On that note, amendments have been introduced that would prohibit the ability of an originator or aggregator to also serve as a guarantor.

Community lenders have also expressed concern that the new federal agency that would be created to oversee the mortgage industry, the Federal Mortgage Insurance Corp., could duplicate many of the regulations already promulgated by the lenders' primary safety and soundness regulators.

Johnson and Crapo hope to bring the bill to the Senate Banking Committee over the next two weeks.

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