House Bill Seeks To Eliminate YSP Among Other Things

Proving that there are multiple ways to regulate the financial services industry, a new measure introduced today in the House would impose significant new restrictions on the mortgage industry.

Among the provisions:

  • The elimination of yield spread premiums. YSP’s are one of those things that the public loves to hate until they come in handy. Both widely used and also abused they are certain to be either restricted or eliminated. It has a feel good sound to it but repealing it will decrease the industry’s flexibility to customize loan terms.
  • Establishes a minimum standard for mortgages that includes an ability to repay and a net tangible benefit test. Sort of a shame that ethical behaviour has to be legislated isn’t it? Anyway the flaws in this one is that the regulators would have the ability to change the standards at will. It’s hard to meet a moving target. Violators would have the opportunity to refinance or modify any loan that runs afoul of the rule within 90 days or the debt would be voided. Better write this carefully to avoid it being gamed.
  • Mortgage securitizers would assume more liability for fraud and/or failure to meet minimum standards and private party securitizations would require the retention of 5% of the credit risk. Hedging that risk would be prohibited. The private secondary market is on life support and these guys want to drive a stake through its heart. I thought we wanted to resurrect the shadow banking market.
  • This is the best. As I read it tenants in property that is foreclosed upon will have to get a 90 day notice to vacate. But if they have a valid lease they get to stay for the remaining length of the lease term. No mention about whether they need to keep on paying the rent. 

Surely this will be improved as it moves through the process, won’t it?

more: here 

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