Momentum is fading in the Johnson-Crapo Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) reform legislation, according to a research note from Barclays.

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Initially, Barclays had noted that strong Democratic support was required for the bill to have success, but now the investment bank views four major obstacles.

The first obstacle is from the liberal activist movement.  “Several influential civil rights groups cited Johnson-Crapo’s lack of provisions to ensure the housing finance system is non-discriminatory,” is one complaint the research note cited.

Fannie Mae, Freddie Mac reform: Not spending political capital

Much like the positive talk the Obama administration gave the idea of a transaction tax without action, the Johnson-Crapo bill has seen positive talk from the administration but not equal action where it matters.

“The Obama administration has not yet spent significant political capital in support of the Johnson-Crapo bill despite issuing supportive commentary,” US Building Products and Homebuilding analysts Stephen Kim, John Coyle and Freda Zhuo wrote.  The report then noted political realities to wrap up its four headwinds.  “While key groups on the left remain engaged, the opposition is likely strong enough to deter progressives from pushing to get the bill to the Senate floor in 2014,” meaning a resolution could languish.  “As another headwind, the Senate Banking Committee mark-up has been set for April 29, after Easter recess, leaving a smaller window for full Senate consideration.”

The group has an overall positive outlook on the housing industry, unchanged from previous reports.  Reaffirming this outlook, the bank said its doubts the issue will pose a headwind will to housing stocks over the year.  In the long term, they believe reform will happen. “The similarities between Corker-Warner, Johnson-Crapo, and the newly announced House Waters bill suggest that a general consensus for Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) reform exists,” the note said.

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Midterm elections complicate issue, which ultimately is expected to be resolved

Mid-term elections could complicate matters, but the report is nonetheless clear.  “With all the noise surrounding discussions for the Johnson-Crapo bill, we do believe it still has enough support to pass from the Senate Banking Committee, as the bill likely has support from the 10 co-sponsors from predecessor Corker-Warner in addition to votes from Sen. Johnson and Sen. Crapo,” the report concludes. “Moreover, the critical 15+ out of 22 threshold remains likely. However, given the time constraints and the reasons listed above, we do not believe that the Johnson-Crapo bill will reach the Senate floor in time for a vote in 2014.”

On Monday ValueWalk reported on hedge fund activist Bill Ackman was taking an additional speculative position in Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC).