US Sen. Hagan 'Very Concerned' About Mortgage Rules
February 02 2011 - 6:27PM
Dow Jones News
Rules being developed by U.S. banking regulators could make it
more difficult for consumers to get home loans, a new member of the
Senate Banking Committee warned Wednesday.
Sen. Kay Hagan, (D., N.C.) said in an interview Wednesday that
she is "very concerned" that regulators will be too stringent in
defining which loans are deemed less risky and therefore exempt
from requirements imposed by the Dodd-Frank financial overhaul
passed last summer.
The financial overhaul law mandated that banks retain 5% of the
risk of a loan if it is packaged into a security and sold to
investors. The idea was that, with more "skin in the game," banks
will be more cautious because they will stand to lose if a borrower
defaults.
Hagan, along with Sens. Mary Landrieu (D., La.) and Johnny
Isakson (R., Ga.), co-sponsored an amendment to the financial
overhaul providing an exemption for safe mortgages, which gave
regulators the task of defining which mortgages are safe.
In recent weeks, there has been concern in the banking industry
that regulators will be strict in their definition, perhaps only
allow loans with a 20% down payment to receive the exemption. Most
of the lending industry favors a broader definition.
Hagan said she sympathizes with those concerns. "I certainly
didn't want to narrow the availability (of credit), which I think
there's a lot of concern about," she said. "If you do that, then I
think you'll ultimately have a smaller number of entities that are
able to provide those mortgages."
If the definition mandates a high down payment requirement, it
could also harm the mortgage insurance industry, which allows
borrowers to take out loans with lower down payments by collecting
insurance premiums from borrowers.
Hagan's state is home to Genworth Financial Inc.'s (GNW)
mortgage insurance division, as well as Old Republic International
Corp.'s (ORI) Republic Mortgage Insurance Co. and American
International Group Inc.'s (AIG) United Guaranty, another mortgage
insurer.
Of mortgage insurers, Hagan said: "That's definitely an industry
that needs to continue staying in business."
-By Alan Zibel, Dow Jones Newswires; 202-862-9263;
alan.zibel@dowjones.com
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