A securitization trade group Wednesday applauded recent remarks by Comptroller of the Currency John Dugan calling into question "skin-in-the-game" risk-retention proposals.
In a Feb. 2 speech, Dugan said that, though he agrees with the intent of legislative proposals to force originators to retain a portion of the risk exposure on their balance sheets when the assets are securitized, this "is an imprecise" way to improve underwriting and could drive players away from the securitization market.
"A requirement intended to improve the securitization market by improving the quality and trustworthiness of underwriting could significantly curtail the number of securitizations that are actually done," he said, and this "could materially reduce the amount of credit available for housing or any of the other sectors that have … benefited from securitization."
In a press release Wednesday, the Commercial Mortgage Securities Association, agreed that policymakers should avoid reforms that "impede the recovery of the securitization market."
"We support … Comptroller Dugan in recognizing the prudence required when fashioning broad securitization-related regulatory reforms," said Patrick Sargent, the association's president.
The House in December passed legislation to require banks to retain 5% of the loans they securitize. A similar proposal is pending in Senate legislation.
