Wednesday, March 30, 2011

Mortgage Lending Regulations

Securitization of mortgages and other loans by US banks was a catalyst for the 2008 credit crisis. Subprime loan securities were innovative and compelling but the lack of credit risk modeling and regulation lead to a nationwide bank failure. The Dodd-Frank financial overhaul law addresses the lack of regulation in this area by imposing a 5% credit risk requirement on banks for securitized mortgages and loans. Additional regulation on down payment requirements and mortgage ratings are likely to follow.

Wall Street Journal, March 30, 2011
Regulators Unveil Mortgage-Lending Rules