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NAHB submits their plans for GSE and housing finance reform

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  • James Donovan | | 02 Mar 2012, 10:33 AM Agree 0
    It seems to me that the plan suggested here just eliminates the current quasi-judicial agency and replaces it with another with a different name. Second, putting control over the new agency outside of congressional oversight does not make sense. Placing government backstops on the MBS is exactly what got us here via the former GSE's. The best idea to date, is to establish a system that requires the originator, or its agents (correspondent lenders) to keep some skin in the game. If they hold the 1st 20% of losses at the mortgage level on their balance sheet, you would never have a pool default. To further support this mechanism, the originator can't draw down residual interest and is disallowed from writing synthetic swaps against the mortgages in they pooled for 36 months. Any underwriting fraud results in an automatic put-back and any parties involved are prosecuted (including homeowner and LO, Agency, Title Insurer, Appraiser, Swap Provider, NIM Insurer, Rating Agency, Regulator, Investment Bank and the National Association) to the fullest extent of the law.
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