More than four years after the start of the sub-prime crisis, the U.S. housing finance market is poised for a set of mortgage market rules that lenders, secondary market makers and consumer-protection advocates view as too conservative.
It is feared that the tough credit-risk retention rules could eliminate the role of securitization in the private market, while other aspects of Dodd-Frank relating to mortgage finance and consumer protection will add many new expenses for lenders.
Parts of the Dodd-Frank Act aimed at reining in dangerous lending practices and discouraging risky mortgage products have been hailed as bringing sensible underwriting standards to the once-profligate market. For example, Dodd-Frank introduces commonsense ability-to-repay requirements, stating simply that lenders must verify the borrower's ability to repay a loan. It also introduces qualified mortgage (QM) requirements to encourage sound underwriting.
Credit risk-retention rules have, however, been
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