What were the two biggest home-buying and mortgage issues affected by last week's elections?

Chalk up a big win for settlement-cost reform -- streamlining the expensive, paper-laden and poorly understood procedures used by Americans to close a home purchase or settle a mortgage.

Before the election, settlement system reform was in limbo at best. Now it's back on the burner for 2005, and likely to move forward.

Chalk up a big loss, on the other hand, for Fannie Mae and Freddie Mac, the two largest suppliers of mortgage money in the country.

A Kerry administration was certain to handle both congressionally chartered, private mortgage investors far more gently than a second Bush administration. Now, it looks like four more rough years for Fannie and Freddie.

Here is what was at stake on both issues:

Settlement Reform

The Bush administration surprised many of its pro-business Republican supporters by coming out strongly in favor of radical changes to the way Americans close their home purchase transactions. Former housing secretary Mel Martinez, now the Republican senator-elect from Florida, persuaded the Bush White House to support far-reaching changes to the home mortgage system:

* Simplifying disclosures of loan fees and closing costs so that consumers could understand in advance what charges to expect at settlement.

* Creating a powerful new shopping option for home buyers and mortgage applicants -- guaranteed, fixed-cost "packages" of loan-related services that lenders could offer along with their interest rate quotes. Guaranteed packages would allow consumers to shop intelligently among competing lenders, and be certain in advance what the bottom-line costs would be.

Today, by contrast, lenders provide only "good faith estimates" of transaction charges that often are low-balled by hundreds or thousands of dollars. Worse yet, no federal law requires accuracy in lender good-faith estimates. The reform plan would have removed that loophole.

Martinez came under heavy criticism for his proposals from entrenched industry groups -- each with a stake in the highly profitable status quo. They included title insurance agencies, whose high fees and lucrative side deals with realty brokers would have been threatened by fixed-fee packages offered direct to the consumer by mortgage lenders. They also included closing-cost lawyers who receive large and usually undisclosed fees out of home buyers' title insurance premiums on every settlement they conduct.

Consumer groups generally supported Martinez's proposed reforms, but the most threatened settlement industry groups enlisted congressional allies, notably key Republican committee leaders, to put pressure on the White House to delay or torpedo the plans.

After Martinez left HUD to run for the Senate, the White House recognized that settlement cost reform was too divisive an issue for a campaign year. Instead, Alphonso Jackson, Martinez's successor at HUD, pulled the plan off the table for 2004, but promised to come back with revised reforms sometime in the future. Without a second Bush term, of course, that promise would have been moot.

Now, it's for real. Look for intensive discussions with industry and consumer groups in early 2005, say HUD officials, but then expect action on settlement system reform. HUD Assistant Secretary Steven B. Nesmith said, "This isn't going away. We intend to re-propose" a meaningful reform package, even if it doesn't please everybody.

Fannie Mae, Freddie Mac

Both companies have been rocked by charges of accounting misdeeds, and both have come under withering criticism from the Bush administration and the Federal Reserve Board for pocketing multibillion-dollar federal subsidies while doing too little for low- and moderate-income home buyers.

The Bush administration wants to create a new regulatory agency to rein in and oversee Fannie and Freddie. Congressional Democratic supporters of the mortgage corporations generally favor a less stringent regulator, and worry that the Bush administration's real goal is to cut off the companies' $2.25 billion credit line at the Treasury.

Reform legislation on Freddie and Fannie oversight will get high priority early in 2005 from the Republicans who run the Senate and House banking committees. With bigger and more conservative majorities in both houses, Freddie and Fannie can expect to get something close to the intrusive new regulator they most feared.

On Nov. 1, HUD hit both companies with a little-publicized taste of things to come: stringent new requirements that both companies devote steadily rising amounts of mortgage capital to lower- and moderate-income families -- 56 percent of all their business by 2008, even if so doing lowers their revenue and increases their risks.

Neither Fannie nor Freddie likes the new requirement. They argue it will force them to reduce attention to other sectors of the market, including refinancings for higher-income households.

But new, federally imposed housing goals may be just the start of both companies' headaches under a second Bush term.

Kenneth R. Harney's e-mail address is KenHarney@earthlink.net.