Next week -- nearly 31 months after the government rescued government-sponsored entities Fannie Mae and Freddie Mac -- the process to reform them and the government's role in housing finance will finally be taken up by Congress. At that time, the House Financial Services Committee will begin considering a series of bills to reshape Washington's role in housing. What should we expect?

What Reform Might Look Like

Republicans have been calling for housing finance policy reform since the financial regulation battle began in 2009. As part of that fight, Rep. Jeb Hensarling (R-TX) created a bill that would wind down Fannie and Freddie over the course of two to five years. The legislation did not make it into the regulation bill. He re-introduced the bill last week. According to Peter Schroeder at The Hill, Republicans believe a scatter-shot approach will be most effective. So we can expect to see a number of smaller bills offered, rather than one big, sweeping piece of legislation. For example, we will also see a bill to establish a covered bond market in the U.S., to assist with mortgage funding.

The Obama administration got into the game last year. It first requested comment from the public on how to change housing finance policy. It followed up with a conference last fall. Then, in February, it finally released a big housing policy report, in which it explained how it intended to slowly eliminate Fannie and Freddie. The plan also offered three alternatives for how to structure the government's role in housing finance going forward.

We haven't heard much from Congressional Democrats yet, however. So they'll be the wild card that will be most interesting to watch over the next several months. At this point, Republicans and the Treasury appear to agree on eliminating Fannie and Freddie -- they just differ on timing. But if Democrats want to keep the firms around in some form, then they could shake things up. The more difficult task will be defining the role of government in the housing finance process going forward. Even without Fannie and Freddie, Washington could still play have a very significant part in housing finance through new agencies or initiatives.

How Long Will Reform Take?

Since Republicans are taking a piecemeal approach, it's pretty hard to say precisely how long it will take for reform to happen. Some less controversial bills could pass relatively quickly if Democrats are on the same page as Republicans and the President. But that's a big "if." Republicans will be able to pass legislation pretty easily in the House, due to their big majority. In the Senate, however, Democrats still rule. So far right-leaning House bills will probably be either ignored or quickly voted down by the Senate.

We could look back at the financial regulation bill to get a sense for how long it might take for more sweeping measures to pass. The House Financial Services first began considering a regulation bill in October 2009. A bill was signed by the president about eight months later.

That probably means a best-case scenario would be for a significant housing finance policy reform bill to pass just before winter recess this year. After the House committee approves legislation, the full house must give it the nod. After that, it goes to the Senate, which might have its own ideas. Then the two chambers must agree on changes. Of course, the President will also have to sign it.

But that best case scenario occurred when Democrats controlled the House, Senate, and White House. We should expect sweeping legislation to now take much longer, since Congress is split. As a result, it doesn't seem particularly likely that we'll get any very significant, controversial changes this year.

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