The House Financial Services Committee on May 25 approved H.R. 1461, legislation sponsored by House Financial Services Chairman Mike Oxley (R-OH) and Rep. Richard Baker (R-LA), to overhaul regulations for the housing government-sponsored enterprises. The bill would replace the GSE's regulators with an independent agency with bank-like enforcement authority.

It would authorize the regulator to place a GSE into a receivership in the event of financial crisis, and would give the regulator broad authority to regulate minimum and risk-based capital. It also would allow the regulator to reduce a GSE's mortgage portfolio if it becomes a risk to safety and soundness.

Oxley made some last-minute changes to a provision drawing a so-called "Bright Line" between what is considered primary versus a secondary mortgage activity. By charter, Fannie Mae and Freddie Mac are confined to the secondary market. The bill now would explicitly let the GSEs continue using their automated loan underwriting systems and would specifically designate mortgage originations as an off-limits primary market activity.

The bill will now move to full House floor for debate. Similar legislation in the U.S. Senate, S.190, sponsored by Republican Senators Hagel, Sununu and Dole will follow, pending House passage.