WASHINGTON, DC-As expected the Republicans swept into power yesterday, claiming the necessary 39 seats for a majority shortly after midnight eastern standard time. Indeed, when all is said and done the Republicans are expected to have gained 50 seats in this election. The Senate stayed under Democratic control, with its numbers eroded.

The widespread assumption is that these results will translate into political gridlock. However, the Republicans’ majority in the House will give them an edge in certain areas that have a direct impact on the commercial real estate space, starting with rule-making for the financial overhaul as well as the future direction of Fannie Mae and Freddie Mac.

Barney Frank, who at one point appeared in for a tough slog for his seat, won re-election. It was a hollow victory, of course, as he is losing his post as head of the House Financial Services Committee. Set to take his chairmanship most likely is Representative Spencer Bachus of Alabama. Bachus will be leading much of the oversight with the rule-making for Dodd-Frank. He will also be a key voice in the discussions for the overhaul of Fannie Mae and Freddie Mac.

Although the Obama Administration has fully backed the GSEs in conservatorship, support in Congress for these institutions in their current incarnation has been steadily eroding. With the Republicans at the helm, the industry can expect more discussion about taking them out of conservatorship and charting a new course for them, one likely in the private sector. If nothing else, the issue of the government’s guarantee--implicit or explicit--will become a focus again.

Another shift in leadership will come at the Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises for the House Financial Services Committee, where Scott Garrett, New Jersey Republican, is expected to take over. In fact, from a capital markets perspective, this is one
 of the most influential Congressional committees. With Garrett at the helm, some industry insiders are expecting to see a renewed push for covered bond legislation. Garrett was the sponsor for earlier legislation to create a US covered bond market, one industry executive, who wished to remain anonymous, observes, “so we are expecting him to continue to move toward that goal.”

There has been some pushback from government agencies on this issue--namely from the Federal Deposit Insurance Corp., whose chairperson Sheila Bair has said she does not want to see distressed assets move to these vehicles 
if it means the FDIC is left with the worst assets to salvage for taxpayers.

However, this executive tells GlobeSt.com that much of the squabble comes down to a turf war. “With the House in Republican control I do believe we will see more support for covered bond legislation,” the source says. “Now, it will never become a substitute for securitization but it could be a good additive, quasi-balance sheet lending tool for some.”

Changes in lower level posts also will have a significant impact on the legislative and regulatory forces that will shape the real estate industry over the next two years. Ohio Attorney General Richard Cordray, a Democrat, was also on the ballot--a seat that he lost to Republican challenger Mike Dewine. Cordray has been among the most aggressive of the attorneys general in investigating the latest twist of the mortgage crisis--the false affidavits submitted by the so-called robo-signers.

Cordray has also become the defacto leader of the 50 attorneys general investigating
 he banks, according to news accounts, with him reportedly leaning toward forcing the banks to modify homeowner mortgages as part of any settlement. What his defeat will mean for this strategy is unclear.

The election results will boost the confidence of independent regulatory agencies to take different paths than those suggested by the Treasury Department. Indeed, there have been signs of this already--without the umbrella of protection afforded majority rule, it is certain to intensify. For instance, when the negotiations for the financial overhaul were underway, there were several cases in which Treasury tried to sway agencies to their viewpoint. 

One notable example was when the department tried unsuccessfully to persuade the FDIC to wait for the joint rules under Dodd-Frank before issuing its version of the safe harbor rule. With the enhanced Republican numbers on the Hill, the industry can expect such  departures from the Administration’s policies to continue.