Regulators and Lending Rules
March 31, 2011
Federal regulators proposed potentially transformative lending rules, kicking off what is likely to be a furious effort by the housing and banking industries to soften the proposal.The financial-overhaul law requires banks to hold 5% of the credit risk for mortgages and other loans that are bundled together and sold off as securities. The idea is that banks and other issuers of securitized loans will do a better job ensuring the quality of those loans if they are required to have more ``skin in the game.'' The law also allowed regulators to exempt certain gold-standard residential mortgages from the risk-retention requirement. Because the rules are likely to raise costs for lenders, any mortgages satisfying the ``qualified residential mortgage'' definition are likely to feature lower borrowing costs. If approved, the proposal would eventually reset what constitutes a prime mortgage as only those to borrowers who pay down payments of at least 20%, with higher equity levels required for refinances.
VastPress 2011 Vastopolis
