Roubini, others call for U.S. mortgage standards

By Corbett B. Daly

WASHINGTON, Dec 21 (BestGrowthStock) – A group of investors and
prominent academics on Tuesday urged the creation of national
standards for U.S. residential mortgages to help borrowers who
are having trouble getting home loans.

The group, in a letter to Federal Reserve Chairman Ben
Bernanke, Treasury Secretary Timothy Geithner, and a host of
other U.S. officials, said the recent foreclosure document
processing fiasco, in which banks are accused of using
“robo-signers” to sign hundreds of unread documents a day,
demonstrate an urgent need for action.

“Problems of this magnitude are a threat not only to the
economic recovery, but to the safety and soundness of all
insured depository institutions,” the group, which includes
dozens of academics, including Nouriel Roubini of New York
University, Dean Baker of the Center for Economic Policy
Research, and Anthony Sanders of George Mason University, said
in the letter.

“The chaotic situation in the mortgage market today demands
immediate action to ensure all parties are treated fairly and
to restore the confidence needed to support a recovery in real
estate markets and the entire U.S. economy,” they said.

The group wants officials to move swiftly to finalize rules
governing the way U.S. residential mortgages are originated,
sold and serviced that were mandated as part of Dodd-Frank Act
that overhauled Wall Street regulation.

The letter, dated Tuesday, is an effort to push forward
what is expected to be a long and complicated rulemaking
process, due to completed in the spring.

Fed Governor Daniel Tarullo earlier this month said it “may
be warranted” to consider adopting a set of national standards
for mortgage servicers, the firms that collect loan payments.

“We agree with Governor Tarullo. The time to act is now,”
the group said in the letter.

They said that “a dearth of credit is causing a serious
lack of confidence among potential homebuyers.”

A key component of the Wall Street overhaul legislation
involves a “qualified residential mortgage,” which would be
exempt from new rules that require lenders keep at least some
portion of any loan on their own books instead of selling loans
off entirely to a third party.

Lawmakers inserted the provision to try to put a lid on
risky lending by making sure loan originators would share some
of the burden of any loans that went bad. Lenders do not like
these requirements, known as “skin-in-the-game,” because they
cut into profits.

Sheila Bair, chair of the Federal Deposit Insurance Corp,
told a congressional panel earlier this month that clarity on
the definition of a “qualified residential mortgage” could
diminish the natural conflict between the servicers who collect
mortgage payments mortgages and the investors who own the
loans.

Predetermined practices could help avoid instances when a
mortgage is serviced to the benefit of one type of investor
over another or where the servicer may be protecting its own
interests over investors, Bair said.

The coveted designation is meant to help set a standard for
securities that avoids pitfalls of the past, and promote
greater liquidity for U.S. mortgages by allowing loans to be
sold and freeing up lenders to lend again.
(Reporting by Corbett B. Daly; Editing by Leslie Adler)

Roubini, others call for U.S. mortgage standards