The GSE reform debate is focused largely on the issue of how first-loss and catastrophic loss should be distributed among private and public institutions. However, in our view, if the current regulatory regime with respect to loan origination does not achieve better balance between consumer protection and credit availability, then we expect that mortgage lending volumes and the overall supply of credit allocated to housing finance is likely to continue falling in 2015 and beyond. Additionally, if investors cannot be assured that their interests are protected in mortgage securitizations, private capital will be less available and more expensive.
KBRA does not believe that there is any likelihood of housing reform legislation passing
KBRA believes that there is mounting evidence that the legislative and regulatory reaction to the 2008 subprime financial crisis is having a decidedly negative impact on mortgage lending and private mortgage finance. We believe that stricter regulation on mortgage lending and bank capital, and legal settlements incurred by financial institutions, are having a chilling effect on credit availability, and on the willingness of private investors to support mortgage credit more generally.
To view the report, please visit https://www.krollbondratings.com/show_report/1411.
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