Robert E. Story Jr., CMB, chairman of the Mortgage Bankers Association (MBA) has issued the following comment reacting to passage of S. 3217, the Restoring American Financial Stability Act of 2010: "MBA has long supported a more efficient regulatory regime for the financial services industry, and passage of the bill is another important milestone. However, the bill, as we view it, still has flaws that will negatively impact borrowers and the real estate markets.
"The next step will be to reconcile the differences between the House Bill and the Senate bill. While there are a couple of ways this could happen, MBA believes the American people would be best served by Congress convening a formal conference committee. Of particular importance to us is ensuring that the final language on risk retention does not discourage prudent, responsible lending. If not, we risk doing long-term damage to our single-family, multifamily and commercial real estate markets.
"The Senate made important progress by creating a qualified mortgage exemption for lower-risk single-family mortgages from the additional risk retention the bill proposes. This approach will allow lenders to make prudent, responsible loans to well-qualified borrowers and help facilitate a quicker recovery of the housing market.
"Likewise, we are pleased that the Senate also recognized that risk retention can take various forms in commercial and multifamily real estate transactions, including reps and warranties and first loss positions. The Senate bill appreciates the critical role that strong underwriting plays, and gives greater guidance to the regulators tasked with writing the new risk retention rules.
"The bill could further be improved by creating one consistent standard for the purpose of regulating residential mortgages. If legislators insist on moving forward with mandating additional risk retention, setting credit criteria and restricting certain loan products and features, they should use one consistent standard that works across the board to identify what is and what is not subject to the new rules.
"Unless improvements are made during the Senate-House negotiations, this bill will likely bring regulations that will only further constrain credit for borrowers, make real estate purchases more expensive and drag out the ongoing turmoil in the real estate markets.
"All through this process, we have worked with members of Congress on both sides of the aisle to try and craft the best possible bill that will create a new regulatory structure that will better protect consumers without limiting product choices and increasing borrowers' costs to finance a real estate purchase. We look forward to continuing those efforts."
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