U.S. agency proposes relaxed rules on mortgage risk, underwriting

A vacant Housing and Urban Development (HUD) home (R) is pictured in North Las Vegas, Nevada April 2, 2013.

Credit: Reuters/Steve Marcus

WASHINGTON | Wed Aug 28, 2013 11:30am EDT

WASHINGTON (Reuters) - U.S. regulators on Wednesday unveiled a reworked proposal to reduce risk in the mortgage market by requiring lenders to keep a stake in the loans they bundle and sell as securities.

The Federal Deposit Insurance Corp. approved a new version of the stricter 2011 proposal designed to limit the type of shoddy underwriting practices that fueled the housing bubble. The revised proposal would mainly require banks and bond issuers to retain a portion of mortgages when borrowers are spending more than 43 percent of their monthly income to repay loan debt.

The original plan initially drew wide criticism. The revised plan loosens the definition of "qualified residential mortgages" that are exempted from the regulations. Regulators received more than 10,000 comments on the first proposal that sparked alarm across the housing industry and among consumer groups.

Regulators originally said banks and bond issuers would have to keep "skin in the game," or hold part of securitized loans on their books, unless the mortgage included a 20 percent down payment.

In the new proposal that is set for public comment, regulators eliminated the down payment requirement for qualified residential mortgages.

Those opposed to the original proposal with the 20 percent down payment had feared the rules could restrict access to credit for some low-income borrowers.

Instead, mortgages that meet a minimum standard already approved by another regulatory agency will be considered exempt from the risk retention rules.

(Reporting By Margaret Chadbourn and Emily Stephenson; Editing by Chizu Nomiyama and Kenneth Barry)

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Osborne's Help Fuels £50m Estate Agency Deal

George Osborne's effort to stimulate the UK housing market is fuelling a flurry of corporate activity among estate agency owners, with one entrepreneur poised to reap a multimillion pound windfall from the sale of his business.

Sky News understands that Dale Norton, who established the Berkshire-based Romans Group in 1987, has decided to cash in by offloading the company to Bowmark Capital, a private equity group, for around £50m.

Bowmark has seen off competition from rival bidders including LDC and Inflexion and could conclude a takeover of Romans, which operates more than 20 branches and employs more than 350 people, within days.

The deal will trigger speculation that Bowmark will merge Romans with Leaders, a chain of letting agents in which it invested in 2010.

Analysts said that Bowmark would be able to reap significant cost savings by combining the two businesses.

One insider pointed out that the private equity group had grown Leaders from 42 to 72 branches through 29 separate acquisitions which it had then integrated during the last three years.

However, one person familiar with the deal said that a merger was "not on the cards" at the moment and that Romans would be an "independent acquisition" by Bowmark.

The transaction comes amid growing optimism about the state of parts of Britain's housing market as the Chancellor seeks to use a string of measures to accelerate a wider economic upturn.

Mr Osborne's Help to Buy scheme, which launched in April, has seen 10,000 first-time buyers sign up for state-sponsored financial support to buy new-build homes, triggering a surge in house builders' share prices.

Countrywide, an estate agency chain, has seen its shares soar since a flotation earlier this year, while Foxtons, a rival, is likely to announce its intention to list its shares later this month.

Although housing transaction volumes remain low by historical standards, figures published this weekend by the Halifax show that mortgages are now typically more affordable than at any time since 1999.

The second phase of the Help to Buy initiative is due to kick off early next year, and is proving to be more politically contentious.

It will enable lenders to use Government-backed guarantees to offer £130bn-worth of mortgages with smaller deposits of at least 5% on new and older properties.

The Chancellor is, though, being urged to abandon the scheme to prevent another housing bubble, with data published this month revealing that lending to first-time buyers has risen to its highest level since the beginning of the financial crisis.

The takeover of Romans will effectively be structured as a management buyout, with the existing executive team rolling over some of their stake into the new ownership structure.

The size of Mr Norton's shareholding is unclear, although insiders said he would crystallise "a considerable fortune" by selling the company he founded 26 years ago.

Bowmark declined to comment on Sunday.

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History, justice, and the agency of God : a hermeneutical and exegetical investigation on Isaiah and Psalms / by Christoph O. Schroeder.

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