One of the champions of the Dodd-Frank Act, the financial reform law passed in 2010, is upset with federal regulators for backing down from stricter mortgage rules in the face of pressure from the real estate industry.
Former U.S. Representative Barney Frank blasted regulators for what he said was a failure to stand tall on new rules that place much tighter restrictions on the market for mortgage securities. A coalition of real estate interests and consumer advocates known as the Coalition for Sensible Housing Policy has been lobbying strongly against the restrictions.
“This is a grave error, and contrary to the assertion that it would best carry out the statutory intent, significantly repudiates it,” Frank wrote in a letter sent to regulators yesterday and reviewed by the Wall Street Journal.
The 2,300-page law, which is enforced and interpreted by a variety of government agencies, has been implemented over the last three years.
In August, six regulators suggested tweaking proposed rules that demand mortgage securities issuers hold five percent of the credit risk from financial products they market on their books, according to the Journal. The original proposal did include an exemption for high-quality loans that met certain criteria — including a 20 percent down payment — but the August proposal is far broader and would cover the majority of issued loans, the Journal said.
“If all of these people were correct in their collective judgment, we would not have had the crisis that we had,” Frank said of the lobbyists, according to the paper. [WSJ] – Hiten Samtani