Vote Coming Soon on Risk Retention, Other Matters

The House of Representatives is slated to debate and vote on a massive regulatory reform package next week that includes several bills addressing abusive mortgage lending practices and risk retention on sales and securitizations of mortgages. The House Financial Services Committee completed action on the reform package on Wednesday when it approved a bill to set up a resolution process for "too big to fail" institutions. The "systemic risk" bill also gives regulators the discretion to set risk retention requirements as high as 5% on Federal Housing Administration, Fannie Mae and Freddie Mac loans. The regulatory reform package also includes bills that create a Consumer Finance Protection Agency, regulates the trading of derivatives, and a bill (H.R. 1728) the House passed in May that curbs subprime lending practices. The mortgage industry prefers the risk retention provisions in H.R. 1728, which totally exempts lenders and securitizers from retaining a portion of the credit risk on FHA and GSE loans. Some industry lobbyists have been wondering how committee chairman Barney Frank, D-Mass., would deal with the different risk retention provisions. Rep. Frank told reporters he would drop the original provision in H.R. 1728. "The risk retention section of the subprime bill will conform to what we did in the systemic risk bill," the chairman said.