'Retention' Discretion Given to Regulators Under Amendment

The House Financial Services Committee has approved an amendment to a mortgage reform and anti-predatory lending bill that would give federal regulators the discretion to make exceptions to a 5% credit risk retention requirement. The bill requires lenders to retain 5% of the credit risk on non-prime mortgages that are sold or securitized. The amendment would allow the Federal Reserve Board and Treasury Department to relax the 5% requirement on lenders for certain mortgage products. In addition, it would allow regulators to apply credit risk retention to securitizers. Committee chairman Barney Frank, D-Mass., noted that Treasury asked for this discretion over securitizers. "I think it is justifiable," Rep. Frank said. But the chairman believes the main responsibility should be on the lender and he wants to talk with Treasury officials more about their approach. The committee also approved an amendment by Rep. Paul Kanjorski, D-Pa. which requires state monitoring of appraisal management companies and federal oversight of AMCs that are subsidiaries of banks and thrifts.