Dodd-Frank News Center

Revival of Mortgage Securitization Depends on Greater Transparency

By James Hamilton, J.D., LL.M., Senior Writer Analyst, CCH Federal Securities Law Reporter; and CCH Derivatives Regulation Law Reporter; Co-author, Sarbanes-Oxley Manual: A Handbook for the Act and SEC Rules, Dec. 16, 2008.

A recovery in the market for mortgage-backed securities will require greater transparency and less complexity, as well as comprehensive and standardized loan-level data that will allow more independent credit analysis, in the view of Federal Reserve Board Governor Randall Kroszner. In remarks at a Fed seminar on the mortgage markets, he sketched a scenario under which investors may gradually regain confidence in mortgage securitization.

Congress Passes Housing and Economic Recovery Act

The Housing and Economic Recovery Act of 2008, Public Law 110-289 enhances the safety and soundness of Fannie Mae, Freddie Mac and the Federal Home Loan Bank System; imposes licensing and registration requirements on mortgage loan originators; and reduces the number of mortgage foreclosures. The Act also creates a new, independent regulator for the government sponsored housing enterprises (GSEs), called the Federal Housing Finance Agency (FHFA). This agency has the authority to establish capital standards for the GSEs and also to establish prudential management standards addressing internal controls, audits and risk management. The FHFA can restrict asset growth and capital distributions by undercapitalized institutions and, if necessary, can place an insolvent institution into receivership. 

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_public_laws&docid=f:publ289.110.pdf