The proposed regulatory reform legislation recently agreed to by the House and Senate conferees will place more demand on the FHA and Ginnie Mae programs.

Exempting FHA, VA and Rural Housing from the “qualified test” means there will be no risk retention requirements for mortgage originators who participates in these programs.

The unintended consequences of this action will push the mortgage industry to automatically migrate to one of these lending programs because they would provide a safe haven from future consequences. This action will cause  FHA volumes to increase to even greater levels than they're currently experiencing. Historically, Ginnie Mae’s issuances have consistently represented 35% of the securities issued each month but last month Ginnie issuance almost topped Fannie Mae's.

This unprecedented growth has created undue stress on the FHA and Ginnie, who both suffer from a lack of funding and the inability to operate effectively. If congress is going to add additional responsibilities onto FHA and Ginnie, they need to address the outdated charters by which they operate.

Today Ginnie Mae has approximately $1 trillion in its portfolio. Any substantial increase in volume from regulatory reform will certainly cause unnecessary risk if they are required to operate under its current charter.

It’s time that both these organizations are operated as independent entities separated from HUD. Provide them the same operating freedom and capabilities that the FDIC and the Patent and Trade Office enjoy. Combine them if necessary but allow them the freedom to operate as every other major contributor to the housing industry operates but keep them under a watchful eye of an assigned regulator.