Garrett Bill to Aid Private MBS Moves Ahead

Good news yesterday for the private MBS market as Representative Scott Garrett’s Private Mortgage Market Investment Act was passed by the House Financial Services Subcommittee on Capital Markets Insurance, and Government Sponsored Enterprises.

This bill would authorize the Federal Housing Finance Agency to develop standards for mortgage products, repeals the Dodd-Frank Act’s risk retention rule, increases the quality of loan level information and disclosures for investors, removes conflicts of interest between servicers and investors, and prevents regulators from unilaterally forcing investors to reduce the principal of loans in which they have invested.

The closeness of the vote by the subcommittee (18-15) may hide the fact that apparently many legislators on both sides of the aisle agreed on many of the proposed elements.  The biggest bone of contention seems to have been the repeal of the risk retention or so-called skin-in-the-game provision legislated by the Dodd-Frank law.  This publication is already on the record for taking a stand against this arbitrary and totally unnecessary provision and how it probably hurts more than it helps the securitization market for residential mortgages, as well as other asset classes.

The next step for the Garrett bill is the full House Financial Services Committee although, as of today,  no hearing dates have been scheduled.

This is a great leap forward for the restoration of some sanity to the securitization markets.  Hopefully, momentum will continue to build.

About markferraris
Managing Principal Orchard Street Partners LLC

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