Three U.S. agencies signed off on relaxed mortgage-lending rules Wednesday, helping complete a long-stalled provision of the 2010 Dodd-Frank financial law, the Wall Street Journal reported today. The Federal Reserve, Securities and Exchange Commission and Department of Housing and Urban Development approved the new rules for the mortgage-backed securities market a day after three other agencies approved the standards. The regulators’ actions came over the objections of two SEC commissioners, who warned that the rules would do little to prevent a return to the kind of lax mortgage underwriting that fueled the financial crisis. The rules are intended to improve the quality of loans by giving banks a financial incentive to ensure that mortgages can be repaid. The initial rules required that banks hold 5 percent of the risk of mortgages packaged and sold to investors or require a 20 percent borrower down payment. But regulators, concerned that overly stringent rules would harm the housing market’s recovery, backtracked on the 20 percent down payment. Instead, banks will be able to avoid the 5 percent risk-retention requirement if they verify a borrower’s ability to pay back the loan and comply with other requirements, such as a requirement that a borrower’s debt payments not exceed 43 percent of their income.
