The Community Mortgage Lenders of America (CML America) and the Community Mortgage Banking Project have sent a letter to lawmakers warning that proposals under consideration by Congress will have a ‘devastating effect’ on mortgage lending and increase risk in the mortgage system.
The letter, addressed to Senate Banking Committee Chair Sen. Chris Dodd, D-Conn., and Ranking Member Sen. Richard Shelby, R-Ala., focuses on new risk retention requirements proposed in the Restoring American Financial Stability Act.
‘If enacted, the proposals in Congress to impose new capital requirements on main street mortgage lenders effectively spells the end of the community mortgage banker, resulting in less competition and fewer choices for borrowers," says Scott Stern, chair of CML America.
Independent mortgage bankers, which accounted for nearly one-third of all mortgages in 2008, are not structured to hold on balance sheet the cumulative layers of credit risk over multiple origination cycles that is required under the draft bill, the letter says.
The letter was signed by 87 member banks from CML America and the Community Mortgage Banking Project. The lenders provide home mortgage loans in 30 states, representing over $120 billion in annual mortgage originations.