Georgia Senator Johnny Isakson declared on the Senate floor late Wednesday that if federal banking regulators have their way with the risk retention rules — namely a 20% downpayment stipulation — they will derail the nation's housing recovery.
The Republican also warned regulators to allow private mortgage insurance to cover a portion of the downpayment requirement.
So far, it appears that regulators have decided that MI coverage does not reduce defaults and that mortgage insurance should not be used to exempt loans (defined as qualified residential mortgages) from the 5% risk retention requirement of the Dodd Frank Act.
Sen. Isakson said a regulatory proposal to create such a narrow QRM definition will force homebuyers to seek out Federal Housing Administration loans. "It will be a disaster for the recovery of housing to force Americans to only one source of money to finance their home and put so much stress on FHA that it collapses under the burden," the senator said Wednesday evening.
But after Isakson made his remarks, Sen. Bob Corker, R- Tenn., issued a statement saying he supports the regulator's decision to set a high standard for QRMs. "The QRM will serve as the gold standard mortgage" and improve underwriting standards, said Corker, a member of the Senate Banking Committee.
Sen. Isakson recently sent the Federal Deposit Insurance Corp. historical statistics that show well-underwritten loans with private mortgage insurance perform well. Isakson is not a member of the Banking Committee.
