Reopening the mortgage securitization pipeline is a vital step toward a housing market recovery that will boost the wider economy, Comptroller of the Currency Thomas Curry said today in a Las Vegas speech.
"Stricter underwriting standards for mortgage loans have clearly contributed to the sluggish and spotty housing recovery, which in turn has been one of the primary causes of sluggish and spotty economic growth," Curry said at an American Securitization Forum conference. "Getting the securitization pipeline flowing again is a critical component in turning this picture around."
Curry, who pointed out growth in auto-loan securitizations is a "bright spot" that should boost lenders' confidence in well-designed securitizations, said that underwriting standards for mortgage loans must "find a new equilibrium of risk and reward for a sustainable mortgage market."
The chief of the Office of the Comptroller of the Currency, which regulates national banks, also said he recognizes the significance of the so-called Qualified Residential Mortgage rule being written by his and other agencies including the Federal Reserve and Federal Deposit Insurance Corp.
Curry said the objectives for the rule, which requires lenders to retain a stake in risky mortgages they securitize, include "encouraging the availability of consumer credit on reasonable terms, facilitated by the secondary mortgage market, on the one hand, and sound credit market practices and investor protection on the other."
A related measure was released Jan. 10 by the Consumer Financial Protection Bureau. That so-called Qualified Mortgage rule offers legal safe harbor for lenders who follow guidelines for "safe mortgages," which it defines as those made to borrowers whose debt payments are no more than 43 percent of their income, among other things. Some lawmakers and housing industry groups have called for the risk-retention regulation to conform to that rule.
"It's quite possible we will look at that approach and others," Curry said in answer to a question after his speech.