NY Times Editorial: How to Fix the Mortgage Market

Available here:

"A bipartisan bill that the Senate Banking Committee is expected to vote on soon seeks to rejuvenate the housing finance market while guarding against the excesses of the past. Named the Housing Finance Reform and Taxpayer Protection Act of 2014, it aims to ensure broad and steady access to sustainable and affordable mortgages, in part by providing an explicit government guarantee to attract investment in 30-year fixed-rate mortgages and other loans. It also seeks to protect taxpayers from future bailouts partly by requiring those who package and sell mortgage loans to hold capital to absorb losses.

Importantly, it includes a new financing provision, essentially a fee on government-guaranteed securities, to generate money for affordable housing.

For all of its positive attributes, however, the Senate bill is fatally marred by two provisions buried in the text. One, named the “investor immunity” provision, is ostensibly aimed at protecting mortgage investors from legal liability for transgressions by lenders, guarantors or other participants in the mortgage process.

. . .

Another section of the bill, dubbed the “business judgment” rule, is ostensibly aimed at preventing the government from meddling in the decisions of mortgage-market participants as to which loans to include in various mortgage securities." (link)