Johnson-Crapo Amendment to S. 1217

On Sunday, March 16, 2014, the Senate Banking Committee released a draft of an Amendment to S. 1217, which is the housing finance reform bill introduced last year by Committee members Mark Warner (D-VA) and Bob Corker (R-TN) to shut down FNMA and FHLMC and establish a new federal role for housing finance.  The amendment released by the Committee is authored by Committee Chairman Timothy Johnson (D-SD) and Ranking Member Michael Crapo (R-ID).  The amendment is introduced following a series of hearings held by the Committee last fall on S. 1217.  Most significantly, the amendment continues to provide for the establishment of the Federal Mortgage Insurance Corporation and the elimination of FNMA and FHLMC.

The general view is that S. 1217 is likely to be the basis of any bill adopted to reform housing finance.  Unfortunately for covered bonds, there is nothing in the amendment, and nothing in the original bill, to establish a statutory covered bond regime in the United States.  Accordingly, any hope for including covered bond provisions in the bill apparently rests with the House including such provisions in any final bill through the conference committee process.

However, a strong majority of those present at a panel on housing finance reform at the SFIG conference this year in Las Vegas do not expect housing reform legislation to be enacted before 2017.  The best prospects then for covered bond legislation in the near future probably lie elsewhere.