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Your Scorecard on Bank Regulation

However, this time around, the easiest deregulation has already been made, and we're unlikely to see much more of it, even if Mitt Romney and pro-industry Republicans sweep in November. And clarity regarding the future earnings power of banks may be elusive for some time.

Last week I wrote about a threat to the banks' mortgage securitization businesses, given a new Basel-related risk-weighting proposal from the Fed and other regulators (compounding already-existing deterrents relating to reduced Tier 1 capital crediting for mortgage servicing rights). But another related threat could become clearer as the Obama campaign shifts its populist focus from student loans to home loans.

I'm talking about the large banks' recently robust margins from refinancing conforming Fannie-Freddie loans -- the byproduct of the competitive advantage they enjoy as incumbent servicers of underwater mortgages that are being refinanced via the Home Affordable Refinance Program (HARP). That advantage allows Wells Fargo, JPMorgan, Bank of America, Citigroup and Ally Financial to face less "rep and warrant" or putback risk from the GSEs, and thus to underwrite HARP loans far more profitably than they would if they faced a competitive field.

Meanwhile, get ready for the president to reiterate the notion that Republicans are preventing millions of Americans from taking advantage of historically low interest rates, simply because the GOP won't pass legislation that would soften rules to allow "underwater" borrowers (owing more than their homes are worth) to refinance via Fannie and Freddie.

After trying to force GSE regulator Ed DeMarco to ease up rules under HARP (ultimately having to settle for reduced fees, streamlined appraisals, and other constructive-but-not-game-changing tweaks in what has been billed as "HARP 2.0"), and principal forgiveness under the Home Affordable Modification Program (HAMP), President Obama and the administration decided to play its final pre-election hand by sweeping such changes into proposed legislation in early February. The changes were introduced in three separate increments by Senate Democrats Bob Menendez (D., N.J.), Diane Feinstein (D., Calif.) and Jeff Merkley (D., Ore.).

And now the White House is poised to use social media to persuade Republicans to pass the most viable of these bills, the one introduced by Menendez. That measure would try to force the subordination of second liens, transfer of private mortgage insurance coverage (to refinanced loans), eligibility for loans that have loan-to-value ratios below 80% and even further streamlining changes. But perhaps most importantly, Menendez would try to level the playing field so that competing servicers would face the same rep-and-warrant risks as the current top five. And this would almost certainly shrink the big guys' margins, in what has surprisingly been one of their more profitable lines of business.

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