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A resolution authority would be created to dissolve failed behemoths in an orderly fashion — much like the authority given to the Federal Deposit Insurance Corporation to resolve failed banks. FDIC Chairman Sheila C. Bair called “too big to fail” an important issue and “saluted” Obama for his attention to the issue. Mortgage lenders, originators and brokers are likely to be impacted by the proposed creation of a “powerful agency” to oversee all aspects of lending and other financial activity. Obama acknowledged that some borrowers took out loans they knew they couldn’t afford but said many were confused by complicated contracts with a “bewildering array of incomprehensible options.” The new consumer agency could set new rules for mortgage lending, hold mortgage brokers to higher standards and hold nonbank lenders to the same standards as banks with similar services. But the Mortgage Bankers Association’s President and Chief Executive Officer John A. Courson warned Congress in a statement not to create conflicting and contradictory regulatory regimes. He said the current patch of state and local laws should be replaced with just one preemptive set of mortgage regulations for the entire country The president’s plan also called for originators to maintain in interest in loans that are securitized. “And we will require the originator of a loan to retain an economic interest in that loan, so that the lender — and not just the holder of a security, for example — has an interest in ensuring that a loan is paid back,” the president stated. MBA Chairman David G. Kittle cautioned that making all participants in the origination process maintain a financial interest in loan performance might put certain business models at a competitive disadvantage. Obama is calling for the dismantling of the Office of Thrift Supervision. The OTS, which was responsible for regulating some of the biggest failed financial institutions in U.S. history, enabled big institutions to “cherry pick” their regulators. But the American Bankers Association isn’t pleased with the consolidation of regulation. “We believe the Administration’s proposal is so vast and controversial that it will be extremely difficult to enact and will produce great uncertainty in the financial markets and among financial regulators while it is pending,” ABA President and CEO Edward L. Yingling said in a statement. “It needlessly rips apart all the existing regulatory agencies, eliminates charter choices and creates a new agency with powers to mandate loans and services that go well beyond consumer protection.” Also part of the plan is the registration of hedge funds with the Securities and Exchange Commission and the regulation of credit default swaps and other derivatives. |
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