U.S. lawmakers joined business and consumer groups in urging regulators to revise a Dodd-Frank Act rule that they say could make home loans more expensive, calling the measure inconsistent with the intent of Congress.
Republicans including Senator Johnny Isakson of Georgia and Democrats including Senator Kay Hagan of North Carolina endorsed the Coalition for Sensible Housing Policy’s call for changes to the rule, which would force lenders to keep a 5 percent stake in loans they bundle for investors. Regulators proposed exempting home loans only when borrowers make 20 percent down payments.
The coalition of 40 groups including the American Bankers Association and the Consumer Federation of America held a news conference in Washington today to push for changes to the rule, which Isakson said addresses a problem that doesn’t exist.
“We don’t have a down payment problem in this country, but rather an underwriting problem,” Isakson said at the news conference. The draft rule, if left as is, “would make recovery in the housing market almost impossible.”
Dodd-Frank, the regulatory overhaul enacted last year, called for lenders and bond issuers to keep “skin in the game” for securitized loans with the exception of so-called qualified residential mortgages that are deemed low-risk, such as those with fixed interest rates and long repayment terms.
Critics, including coalition members such as the Mortgage Bankers Association, Mortgage Insurance Companies of America, and the NAACP, say the so-called QRM standard could make it more difficult for borrowers to get the cheapest home loans.
“Getting the QRM definition right is vital,” Mark Zandi, chief economist of Moody’s Analytics Inc., said in a report released yesterday. “Too narrow a definition could meaningfully raise the cost of mortgage credit and reduce its availability for many potential borrowers.”
More than 200 House members and nearly 40 Senators signed letters last month asking regulators to revisit the proposal.
The 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 Agency. On June 7, the agencies extended the deadline for public comment from June 10 to Aug. 1.