Reforms Expected To Include Risk-Share Provisions For Lenders

Posted by Orb Staff on June 16, 2009 No Comments
Categories : Residential Mortgage

t of its plan for reforming the financial services industry, the Obama administration is expected to propose significant changes to the secondary market for mortgages, including a provision that would make sellers at least partly responsible for covering losses on asset-backed securities (ABS). According to a [link=http://www.washingtonpost.com/wp-dyn/content/article/2009/06/15/AR2009061502523.html][u]report[/u][/link] from The Washington Post, the government's proposal would make lenders liable for at least 5% of the risk of losses on an ABS. The administration is also expected to propose that loan officers be compensated over a longer period of time, rather than at the closing table. In a situation where a loan defaults, the associated loan officer would be hit with penalties, the Post says. Fitch, Standard & Poor's and Moody's would all be expected to improve transparency of their rating methodology, as well. The president is expected to outline a broad plan for the financial services industry reform Wednesday. Many of the anticipated proposals will require legislation. SOURCE: Washingt

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