The Dodd-Frank Wall Street Reform bill goes a long way toward addressing the issues that led to the meltdown of the private-label securities market, MBS pioneer Lewis Ranieri told the Treasury Department's conference on the future of the housing finance system.
Ranieri said the bill addresses risk retention and requiring securitizers to have "skin in game" if they bundle risky mortgages. "There are new rules for the credit rating agencies," he said, along with capital requirements and real enforcement of regulations.
But the chairman and president of Ranieri & Co. pointed out the bill doesn't address the issue of second mortgages. "The bill is totally silent on second mortgages," Ranieri said. "If we don't resolve the second mortgage issue, we haven't resolved the excess leverage issue."
In a separate conference session on securitization, industry executives discussed ways of preventing consumers from taking out second mortgages without getting the first mortgage holder's approval.
One official noted such an approval requirement could be written into the mortgage as a covenant.
