WASHINGTON Jan 22 An influential Republican
U.S. senator on Monday urged regulators to carefully craft a
mortgage rule so that it does not keep the mortgage market
dependent on government support.
Senate Bob Corker, a member of the Senate Banking Committee
who has been an outspoken voice on housing reform, called for
changes to the new mortgage standards that are being drafted by
six regulatory agencies.
One such rule defines Qualified Residential Mortgages, or
QRMs. These seemingly safer loans would be exempt from a "skin
in the game" requirement that calls for mortgage originators to
keep a portion of securitized loans on their books.
The problem with the current proposal, Corker said, is that
the QRM rule would also exempt loans backed by
government-controlled Fannie Mae and Freddie Mac. That would
likely mean lenders would only make loans that could be sold to
Fannie, Freddie or the Federal Housing Administration, and would
push private capital out of the U.S. mortgage market, he said.
Combined, those three government entities currently own or
guarantee about 90 percent of new U.S. home loans.
Corker also said the QRM proposal is problematic because it
may not match up with another important mortgage underwriting
rule known as the Qualified Mortgage rule.
"Forcing lenders to comply with two separate sets of rules
isn't good policy, and in this case, it would set back the
timetable on doing what we absolutely must do - begin to move
away from a complete dependence on the government for mortgage
credit in our country," Corker said in a statement that was
released with his letter to multiple government agencies,
including the Treasury Department and banking regulators.
Banks have also expressed concern that the new lending rules
would mean a larger government role in mortgage securitization
and the industry has said private issuers are currently sitting
on cash as they wait to see what standard is adopted.
To provide a steady stream of funds, Fannie Mae and Freddie
Mac buy loans and either hold them or repackage them as
securities, which they sell to investors with a guarantee.
When millions of mortgages soured during the financial
crisis, Fannie and Freddie were driven to the bring of collapse
and had to be taken over by the government.
If new standards are not designed carefully, regulators
could "permanently enshrine" Fannie Mae, Freddie Mac and other
government housing entities "as the only large-scale source of
mortgage credit in our country," Corker said in his letter.
The QRM rule is being developed by the Federal Deposit
Insurance Corp, Department of Housing and Urban Development,
Office of the Comptroller of the Currency, Securities and
Exchange Commission, Federal Reserve and Federal Housing Finance