To wit: When he wrote that mortgage-backed securities issuers should have to hold on to at least some of the risk those securities carried, he meant that, and not, “most issuers shouldn’t have to hold on to any risk at all.”
“This is a grave error, and contrary to the assertion that it would best carry out the statutory intent, significantly repudiates it,” Mr. Frank wrote in a comment letter being sent to regulators Tuesday….
The regulators’ original proposal from 2011 contained a narrow exemption focusing on only high-quality loans, where the borrower brings a 20% down payment and meets other stringent criteria. But a proposal released in August for the so-called “qualified residential mortgage” exemption is much broader and covers most loans being made today….
Mr. Frank castigated the regulators, saying they are heeding a fierce lobbying campaign from the real-estate industry. Mortgage lenders, real-estate agents, home builders, civil-rights groups and consumer advocates formed a group, called the Coalition for Sensible Housing Policy, that lobbied heavily against the original proposal for tighter rules.
“If all of these people were correct in their collective judgment, we would not have had the crisis that we had,” Mr. Frank wrote. “More importantly, what their arguments reflect, and what I believe unfortunately is carried over in proposal, is the view that things must always be exactly as they are today.”
Rep. Frank: Revamped Mortgage Rules a ‘Grave Error’ [WSJ Developments blog]