If they originate low-risk, fully documented mortgages, lenders selling loans into the secondary market would be exempt from risk-retention requirements under an amendment Sen. Johnny Isakson, R-Ga., said he plans to offer to the regulatory reform bill.
The amendment would exempt "qualified mortgages" from a 5% risk-retention requirement when a lender securitizes loans. Qualified mortgages could have no interest-only payments, balloon payments or negative amortization. In addition, any mortgage with a loan-to-value ratio exceeding 80% would be required to have private mortgage insurance.
