House Leadership Puts GSE Reform on Backburner

WASHINGTON — House Majority Leader Eric Cantor's failure to include mortgage finance reform in his legislative agenda for the fall has sparked more questions about whether Rep. Jeb Hensarling can advance his legislation to the floor this year.

In a memo to Republican lawmakers sent late last week, Cantor detailed eleven major issues to be addressed, including the budget, debt ceiling, possible military action in Syria and the nation's food stamps program.

While the Virginia Republican noted in the memo that the list is not exhaustive, observers said that the conspicuous absence of housing finance reform from the agenda highlights the long odds the bill faces in getting consideration before the end of the year.

"This agenda is a clear statement that there are a number of issues that rank higher on the to-do list than mortgage finance reform efforts," said Isaac Boltansky, a policy analyst at Compass Point Research & Trading.

Rep. Patrick McHenry, a senior lawmaker on the House Financial Services Committee and a cosponsor of the legislation, raised similar concerns during an interview on Monday, noting that the timing of a vote remains unclear in part due to the other priorities facing Congress this fall.

"The question of timing is one that perhaps gets crowded out by the debt ceiling, keeping the government open and war. So, understandably, the PATH Act is very important, but maybe not as important as a question of our international engagement in foreign conflicts," said McHenry, speaking after his remarks at the National Association of Federal Credit Unions' congressional caucus.

Still, McHenry noted that Cantor's memo doesn't "preclude any other piece of legislation getting added to it," saying he's optimistic that the bill will ultimately see "good action on the House floor."

Hensarling, who chairs the House Financial Services Committee, McHenry and several other senior members of the panel introduced a bill in July that would unwind Fannie Mae and Freddie Mac and move the housing finance system towards a private market system. The banking panel passed the bill later that month, with a vote largely down party lines.

Although Hensarling moved the bill quickly through committee, a floor vote was always going to be difficult considering the packed legislative calendar and ongoing reticence among some Republican lawmakers to support a bill that lacks a government guarantee for the market. Several major housing groups, including the National Association of Realtors and the National Association of Home Builders, have been lobbying for changes to the legislation before it reaches the House floor.

"I was never convinced that it was likely to get to the floor, because with all of the other factors swirling around — the short calendar, lots of high pressure votes on big picture, must-do items — it didn't seem reasonable to me that they would want to bring up legislation like the GSE bill that's a controversial vote for some members," said Brian Gardner, a policy analyst for Keefe, Bruyette & Woods.

Rep. Shelley Moore Capito, R-W.V., another bill cosponsor, reiterated on Monday that the bill's authors remain open to the possibility of changes before moving forward with a chamber-wide vote. Hensarling said last month that he was open to changes to the bill during a housing event in Dallas, Texas.

"We know and we knew when we passed it that it wasn't going to stay exactly as it was primarily written. I can accept that. I think the point is getting Fannie and Freddie wound down and to allow the private market to be able to reconstitute and to get FHA back to its original mission," Capito told reporters at the NAFCU conference. "I think the core principles are in there, but we knew there are issues that some people just are not going to be able to go with in order to get a consensus to get the whole thing through. So we figured there'd be changes before it got to the floor."

She declined to specify what kinds of changes are on the table at this time, noting that some banking panel members may discuss the issue during a private meeting on Monday afternoon.

Capito added that the bill's supporters will also continue to advocate for the legislation with House leadership.

"I think it's incumbent on us to really put pressure on the leadership and tell them that this is a high priority," she said. "We have been talking with them, so hopefully we'll be successful."

In a statement, Hensarling said that Cantor has "continually expressed to me his strong interest in bringing the PATH Act to the floor and it is my hope that we can do so by the end of the year."

"We have held several meetings with members to educate them on the PATH Act and to listen to their perspectives, and the feedback has been very positive," Hensarling said. "We will continue to educate and listen to members and drive the debate toward a sustainable housing finance system."

Still, Gardner noted that getting the bill to the House floor is less crucial until the Senate Banking Committee starts making progress on its own legislation. Sens. Tim Johnson, D-S.D., chairman of the banking panel, and Mike Crapo, R-Idaho, the top Republican on the committee, have said they will take up the issue this fall, but it's still not clear when or if legislation will be produced.

"I don't think it's hugely important whether the PATH Act is debated in October, November, January or February," Gardner said. "What's really important is that a Senate bill starts to move, because at least there's a House committee bill. Until the Senate Banking Committee goes through its series of hearings and starts to put through a bill, there's only so much for the House to do."

Gardner also cautioned that Hensarling needs to tread cautiously when weighing changes to the bill before bringing it to the House floor.

"You have to be careful about negotiating with yourself, because there is no Senate bill yet and that's when the real negotiations and compromising are going to occur," he said. "That's always been the end game — get a bill through that is the most free market, least reliant on any kind of government backstop, and know you're going to have to compromise later."