One of the many questions I have about pending tax reform is how, if at all, it will impact the housing market?

What I’m most intrigued by are the concerns that have been raised by GSE’s. Specifically, the American Banker headlined an article last week warning that “Tax reform threatens to drain GSEs’ dwindling capital.” The paper reports that in a regulatory filing earlier this year Fannie Mae said, “if legislation significantly lowering the U.S. corporate income tax rate is enacted, we expect to incur a significant net loss and net worth deficit for the quarter in which the legislation is enacted and we could potentially incur a net loss for that year.”

With the usual caveat that my father is the accountant in the family, not me – the problem is that in the aftermath of the mortgage meltdown, the GSE’s were able to write down future losses based on a 35% corporate tax rate. Some analysts suggest that a 20% tax rate would cost Fannie and Freddie a combined $20 billion; yes, that’s billion with a B. On the bright side, perhaps another GSE financial crisis will spur Congress to act on housing reform once and for all.

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