New rules are in the works for the mortgage lending industry that have mortgage insurers breathing a sigh of relief. The Obama administration and industry regulators are developing new rules that will allow mortgage insurance companies to say in the game.
The role of insurers in the mortgage industry is to be a safety net for lenders if a borrower goes south on a loan, the insurer reduces or can even eliminate the loss to a lender.
The proposal being drafted, required by the Dodd-Frank Act, “will force loan originators and securitizers to retain in their portfolios at least 5 percent of the value of loans, rather than shifting all of the risk to investors who buy the loans.” according to Reuters.
In order for the proposal to move forward for comment six federal agencies, the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, the Department of Housing and Urban Development, the Securities and Exchange Commission and the Federal Housing Finance Agency, need to sign off on the proposal.