Legislated Risk Retention Is No Substitute for Good Underwriting: Report
Both the House bill for financial regulatory reform and the draft Senate bill currently being debated include across-the-board risk retention provisions for home mortgages. The idea is to ensure lenders have more 'skin in the game,' to prevent the risky practices that ignited the housing crisis.
But according to a new study by the Community Mortgage Banking Project, such mandated risk retention is 'no substitute' for good underwriting and could significantly raise the cost of home mortgages.