WASHINGTON (Dow Jones)–Industry lobbyists are raising red flags over a measure that would require mortgage lenders and securitizers to retain a portion of the credit risk of loans for sale to investors.
The proposed requirement is meant to ensure lenders adhere to solid underwriting standards and don’t fraudulently underwrite loans they don’t intend to hold on their books. But the industry warns it could have dire consequences for the mortgage market.
The measure is likely to stir intense debate in the House Financial Services Committee Tuesday. It is contained in legislation authored by the White House and House Democrats aimed at managing risks to the financial system. The panel could vote on the legislation as early as this week.
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