While Johnson, Chairman of thernCommittee, still has the votes necessary to recommend the bill to the fullrnSenate, the opposition of so many Democrats lessen the probability thatrnMajority Leader Harry Reid (D-NV) will bring the bill to the floor. </p

Cheyenne Hopkins says in her Bloomberg piece that the Democratsrnagreed in a private meeting yesterday that they would not support the billrnwithout significant revisions.  They arernsaid to have agreed that the structure of the proposed Federal MortgagernInsurance Corporation (FMIC) which is supposed to replace the governmentrnsponsored enterprises (GSEs) in operating the secondary market and in providingrna catastrophic backstop against mortgage default losses seemed unworkable.  The Democrats also want stronger support forrnaffordable housing goals. </p

In late April Brown introduced multiplernamendments to the Johnson-Crapo bill addressing some of the structuralrnweaknesses he saw in the bill.  One amendmentrnwould create a fiduciary responsibility for investors in mortgage backedrnsecurities.  Brown, on his website, saidrnthis would address the concerns over legal liability for the securities amongrntrustees, servicers, and investors while creating protections essential tornattracting private capital back into the market.  Provisions of the amendment would apply torntrustees of private label securities (PLS) issued both through the new CommonrnSecuritization Platform (CSP) and outside of its.  The CSP is currently under joint development andrnownership of the GSEs and would be administered and regulated by FMIC ifrnJohnson-Crapo becomes law.   </p

Nine other amendments were co-sponsoredrnby David Vitter (R-LA).  These wouldrnclose various loopholes in S 1217 that allowed the participation of depositoryrninstitutions in the secondary market in such a way as might potentially openrnthe Federal Reserve to another bank bailout. rn</p

Warren and Brown have both been<boutspoken in their opposition to eliminating the affordable housing goals whichrnwere long part of the mandate given to the GSEs.  Johnson-Crapo has opted for providingrnincentives to private investors for lending to low-income and minorityrnpopulations.  Civil rights and consumerrnadvocates have also been lobbying for mandates rather than incentives.</p

Warren has said that “eitherrncollectively or individually, issuers of mortgage-backed securities that arerngovernment-guaranteed should have a clear and enforceable duty to serve thernentire primary market.” She has also defended the affordable housingrnmandates of the GSE’s saying that while Freddie Mac and Fannie Mae made majorrnmistakes that cost taxpayers, (their) “affordable housing goals were not tornblame for (the) crisis’ underlying cause.”</p

Warren has also advocated for protectingrnthe role of smaller financial institutions in housing finance.  On her website she says, “A housingrnmarket dominated by a handful of Too Big to Fail institutions would reduce accessrnto mortgages in rural and poorer urban areas. It would also increase systemicrnrisk and reduce innovation and customization in the primary market.  Anyrnfuture housing finance system must ensure not only that smaller lenders canrnsell their loans into the secondary market, but also that they can do so atrncompetitive rates and remain viable players in the primary market.”</p

Bloomberg quotes Sean Oblack, a spokesman for Johnson asrnsaying yesterday that the senator expects the bill to be approved by therncommittee and would continue to seek more support.   “We have made significant progress bridgingrnthe divide among those previously undecided, and the committee vote is just arnfirst step,” he said.  “Those involved inrnthe negotiations have indicated they are interested in continuing to workrntogether to try and find common ground, so the Banking Committee will keeprnworking after favorably reporting out the bill next week.”

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