Senator Pens Letter Urging Simplification of Mortgage Rules

U.S. Senator and Senate Banking Committee member ""Bob Corker"":http://www.corker.senate.gov/public/index.cfm/ (R-Tennessee) warned federal regulators Tuesday to stick to simplified, synchronized lending rules in order to avoid driving out private capital.

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In a ""letter"":http://www.corker.senate.gov/public/_cache/files/48f43c94-a43c-47f4-8345-700223dab310/1-22-13_QRM%20letter%20to%20regulators.pdf addressed to officials for the ""Treasury"":http://www.treasury.gov/Pages/default.aspx, ""HUD"":http://portal.hud.gov/hudportal/HUD, the ""FDIC"":http://www.fdic.gov/, the ""Federal Reserve"":http://www.federalreserve.gov/, the ""Federal Housing Finance Agency"":http://www.fhfa.gov/ (FHFA), and the ""Securities and Exchange Commission"":http://www.sec.gov/ (SEC), Corker said future lending standards must work in sync with the recently issued qualified mortgage (QM) guidelines.

Corker specifically pointed to the qualified residential mortgage (QRM) rule, which is being drafted by the six [COLUMN_BREAK]

agencies. While the rule would tighten up underwriting and risk retention on loans packaged in securities, its current iteration includes an exemption on risk retained for loans sold to Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA)--an exemption Corker believes may drive lenders away from the private market.

""As such, a perverse outcome of a QRM rule that is different than the QM rule would be that we might permanently enshrine the GSEs and other government agencies as the only large-scale source of mortgage credit in our country,"" Corker wrote in the letter. ""With the federal government now standing behind over 90 percent of home loans originated in the United States, a situation that is simply not sustainable, such an outcome would not at all be healthy for our financial system.""

To avoid that outcome, Corker encouraged the agencies to draft a QRM rule that syncs up with the QM rule's ""safe loan"" guidelines, reasoning that a loan that is safe for borrowers is also a loan safe for securitization.

In a release accompanying the public letter, the senator said, ""Forcing lenders to comply with two separate sets of rules isn't good policy, and in this case, it would set back the timetable on doing what we absolutely must do--begin to move away from a complete dependence on the government for mortgage credit in our country.""