Retain Five Percent of Your MBS Portfolio?

Perspectives By Ty Jenkins, President and Founder, DocuTech Corp.

If you ask lenders what the biggest threat to their business is, most will cite lower home values, rising interest rates, or compliance headaches. Yet within two weeks, Congress could pass a rule that will effectively eliminate the independent non-bank mortgage lender’s existing business model. Buried in the midst of the 1,300-page Restoring American Financial Stability Act, the major financial reform bill being debated by the Senate right now, is a provision that may require all lenders to retain a portion of a loan’s risk in accessible capital if they sell the loan on the secondary market.

Imagine the implications. For a local, correspondent, or regional non-bank lender that closes $1 billion in loans each year, that lender may have to come up with an additional $50 million in capital each year to cover the risk of the loan defaulting. Do you have the capital to set aside $50 million per year?

Read the Full Article at Mortgage Technology