Covered bonds are on the House Financial Services Committee agenda for the 115th Congress, with Republicans’ hold over Congress and the Presidency seen raising the likelihood of GSE reform, a move that has often been linked with the prospects for covered bonds in the US.

Covered bonds are included in the oversight plan of the House Committee on Financial Services as an item dealing with capital markets:

“The Committee will examine the potential for covered bonds to increase mortgage and broader asset class financing, improve underwriting standards, and strengthen US financial institutions.”

Covered bonds have been included on the Committee’s agenda in previous years, but the Republican Party’s 2016 election victories make reform of government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac more likely. Alongside reform of the Dodd-Frank Act and other regulation, GSE reform is expect to be a key part of the agenda.

Jerry Marlatt, senior of counsel at Morrison & Foerster, notes that new Treasury Secretary Steven Mnuchin has said that the GSEs’ role has to change.

“The Republicans in the House have said the same thing for a number of years and now have control of both houses of Congress and the White House,” he adds. “And yesterday (Tuesday) the federal appellate court in DC upheld the government’s takeover of the GSEs and taking all of their profits. Finally, the House Financial Services Committee is drafting legislation to reform the GSEs.

“So I think the likelihood of change of GSE status is quite high. That will raise the whole question of housing finance and how it should work. I am quite positive about the prospects.”

Covered bond legislation was included in a GSE reform bill passed by the committee in July 2013, but that did not progress further.

Meanwhile, Republican Scott Garrett, who was chair of the subcommittee on capital markets and GSEs and the major cheerleader for covered bonds in Congress, lost office in November’s elections. Republican Jeb Hensarling continues as chair of the overall committee, while Republican Bill Huizenga is chair of the subcommittee that will have jurisdiction over covered bonds, according to Marlatt.