Banking Chair Proposes New Securitization Rules

House Financial Services Committee chairman Barney Frank, D-Mass., wants to create a new "set of rules" for the securitization of mortgages and empower servicers to modify loans as part of his 2009 agenda. "Our job is to come up with a set of rules that diminishes excessive risk-taking while still giving us the benefits of securitization," Rep. Frank told a Consumer Federation of America Washington conference. He said issuers of mortgage-backed securities will have to retain some liability. "They can't lay off all of the risks" to investors. Servicers of MBS should be able to make decisions about resolving troubled mortgages, he advocated. The committee chairman also said he expects to pass a tough subprime bill that will do away with yield-spread premiums that gives mortgage brokers an incentive to raise interest rates.