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What Does Senate Housing Bill Mean? Answer Still Uncertain for Bankers

As you have no doubt read, the Senate is about vote on a bill to “do something” about the housing crisis.  The Senate package would be the most far-reaching effort by Congress to try and revive the nation's housing markets and – as you might have expected – comes at a price for bankers. 

As an aside:  Have you ever wondered why it is that when something bad happens to the economy, it's bankers who end up paying the price?  We were just wondering. 

But back to the story. 

The Senate proposal includes significant regulatory changes for Fannie Mae, Freddie Mac and the Federal Home Loan Bank System.  It also includes a $300 Billion program made up of grants and tax credits that banks may participate in voluntarily and that is said to help refinance consumers faced with foreclosure actions or who are otherwise having trouble making their mortgage payments. 

Probably like Ed McMahon. 

How to pay for this new program is where the 'rub' comes in.  The Senate bill is likely to include a merchant-reporting proposal as the offset for the housing bill, and it amounts to an unfunded mandate that would impose hundreds of millions of dollars in costs on the business and banking communities.

In order to comply with this mandate, the payment card industry and its third-party processors would be required to fundamentally redesign card processing systems to capture taxpayer identification information.  That's not why these systems were developed.  They are designed to accommodate the efficient and reliable processing and settlement of transactions between consumers and merchants, and for that purpose they work very well. The implementation of this proposal would force significant new costs and more red tape requirements on all business that use or provide credit card services, further straining the business community during already uncertain economic times.

However, Representative Barney Frank (D-MA) – the Chairman of the House Financial Services Committee – has rejected the Senate language which means there's not much chance a deal can be struck before the July 4th recess.   Rep. Frank said the largest sticking point is the effective date for the creation of a new government-sponsored enterprise regulator. The Senate bill would effectively create that regulator immediately, while the House includes a six-month transition  

The Senate bill would increase the amount of single-family mortgage loans that can be acquired or guaranteed by Fannie Mae and Freddie Mac to $625,000. The current loan limit ($730,000) is due to revert to $417,000 at the end of this year unless Congress acts.

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