The housing news keeps getting worse. Prices are still falling for housing in major American cities. The number of foreclosures in 2011 is expected to exceed the number of 2010.
And we have new regulations on mortgage lending to insure that originators of mortgage loans have a stake in those loans getting paid back.
Alan Zibel reports: WASHINGTON (Dow Jones)–U.S. bank regulators on Tuesday unveiled a long-awaited proposal to overhaul the market for securities backed by mortgages and other assets, a piece of the financial system battered by the recession and financial crisis.
The proposal approved for public comment by the Federal Deposit Insurance Corp.’s board is designed to encourage safer lending practices by mandating that issuers of mortgage-backed securities either follow conservative principles or hold a portion of the loans on their books. Companies that package loans into securities would have to hold at least 5% of the credit risk, unless the loans meet an exemption for high-quality loans.
The exemption would apply to loans with a minimum 20% down payment, but the proposal also requests public comment on an alternative approach that would allow for a 10% down payment and mortgage insurance.