In a concerted effort to foster a more balanced and conducive environment for mortgage lending, eight prominent trade groups have called upon federal regulators to reconsider existing bank capital rules. These organizations, which collectively represent a significant segment of the lending industry, are advocating for a more nuanced approach in assessing the risks tied to mortgages when held on balance sheets. Specifically, they argue that the current standards impose overly burdensome capital charges, which ultimately hinder the ability of lenders to offer competitive mortgage products. By proposing a tailored risk weight for mortgages, these trade groups aim to align regulatory capital requirements more closely with the actual risk profiles of these assets, thereby creating a more sustainable lending landscape.
Moreover, the trade groups are also pushing for a substantial reduction in the capital charges related to mortgage servicing rights (MSRs). MSRs, which represent a valuable asset for lenders managing mortgage portfolios, have historically faced significant capital requirements that can discourage investment in this critical area. By advocating for a reevaluation of these charges, the groups are seeking to incentivize lenders to innovate and provide better service to borrowers, ultimately contributing to a more robust mortgage market. If regulators heed these requests, the potential for bolstered liquidity, increased lending activity, and improved consumer choice in the mortgage market could significantly enhance the overall health of the housing sector.
**Key Points:**
– **Trade Groups’ Advocacy:** Eight trade groups representing lenders urge federal regulators to revise bank capital rules for mortgages.
– **Tailored Risk Weight:** Proposal for a more tailored risk assessment for mortgages held on balance sheets to align capital requirements with actual risk.
– **Capital Charge Reduction:** Calls for significant cuts to capital charges on mortgage servicing rights to encourage investment and innovation in mortgage products.
– **Market Impact:** Potential improvements in market liquidity, lending activity, and consumer choice in the mortgage sector for a more robust housing market.
You can read this full article at: https://www.housingwire.com/articles/mortgage-lender-groups-bank-capital-rules/(subscription required)
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