NAR Comments on Proposed Bank Capital Changes

NAR submitted comments to a joint request for comment by Federal Reserve, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, on proposed changes to capital rules they oversee.

These capital rules will affect the cost and availability of bank-financed mortgages.  Depository banks have pulled back from housing in recent years, ceding their share to mortgage banks. The bank regulators are proposing these changes, in part, to draw banks back into housing finance.  More competition may lower prices, but it also means a more resilient system.

NAR commented that:

• The risk weight (e.g. capital) for low down payment loans should not be raised,
• NAR recommends giving credit for private mortgage insurance,
• NAR applauds the regulators for eliminating an onerous capital deduction on mortgage servicing rights and recommending reviewing the risk weight on MSRs,
• NAR recommends re-evaluating the capital required for lines of credit banks extend to mortgage banks, and
• NAR applauds the proposal to reduce capital on private securitizations but recommends lowering them for GSE/GNMA MBS as well.

NAR noted that its recommendations are in line with the President’s Executive Order to mortgage affordability.