| "The loophole has eaten the rule, and there is no residential mortgage risk retention," said Barney Frank!" What happened? in the 1920s there was a raft of real estate securitizations which had the same goal -- making it possible for lenders to profit without risking capital. The Dodd-Frank Act of 2010 set out to clean that up. Now, there would be "risk retention." Lenders would have to have "skin in the game." Not 100 percent of the risk, as in the old days when banks made mortgage loans and retained them until they were paid back, but enough to make the banks care whether the loans were repaid.The details were left to regulators, and it took more than four years for them to settle on the details, which they did this week.The result is that there will be no risk retention to speak of, at least on residential mortgage loans. The lenders had pretty much won all the arguments ! |
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