WASHINGTON, July 19 New rules under
consideration by U.S. regulators could raise mortgage rates and
reduce loan availability as the direct cost of making the home
finance system safer, a government report said on Tuesday.
"Implementing mortgage-related provisions in the Dodd-Frank
Act will involve tradeoffs between providing consumer
protection and maintaining credit availability," the report
from the Government Accountability Office said.
The GAO, Congress' nonpartisan investigative office, was
required by the Dodd-Frank Wall Street oversight law enacted a
year ago to examine provisions that impact the mortgage
It focused most heavily on a rule that requires lenders and
bond issuers to keep a 5.0 percent stake in the loans they
bundle for sale to investors.
The provision forces the mortgage industry to share any
potential losses, and is meant to encourage less risky lending
practices to avoid a repeat of the problems that helped trigger
the 2007-2009 financial crises.
The Dodd-Frank law leaves it up to regulators to determine
which home loans are safe enough to be exempt from the
risk-retention rule. Those loans, known as qualified
residential mortgages, or QRMS, are expected to have lower
Federal regulators have proposed requiring homebuyers to
make a 20 percent down payment and have optimal credit to
qualify for these loans.
The GAO report looked at loan originations between 2001 and
2010 that would have met the likely criteria for the exempt
loans as set out by Dodd-Frank. During that time, GAO found
that "most mortgages would likely have met the individual
criteria" specified in the law.
The agency did not, however, taken into account a proposal
by federal regulators to require homebuyers to make a 20
percent down payment and to have optimal credit to qualify for
a qualified mortgage.
The QRM standard has caused controversy. Critics argue it
could make it harder for people to buy homes and drive up
borrowing costs because lenders would charge higher rates for
loans that do not qualify for the exemption.
"The ultimate impact of the Dodd-Frank Act's
mortgage-related requirements is not yet known and will depend,
in part, on regulatory actions, decisions to fund housing
counseling, and mortgage market adjustments that have not yet
occurred," the report said.
GAO considered input from mortgage industry stakeholders,
and interviewed lenders, investors and consumers.
(Reporting by Margaret Chadbourn)