“The extremely rigid proposals . . . will further prolong the U.S. government’s 95 percent market share of the credit risk of newly originated mortgages,” Deutsch said.
Bair said she is looking for additional comment on the down-payment requirement as the comment period begins. The FDIC is expected to vote on the proposals in late spring or summer.
Treasury Secretary Timothy F. Geithner, who spearheaded the regulatory effort, applauded the proposal.
“Risk retention will help promote better standards for underwriting and securitizing mortgages, which is good for the long-term health of the housing market and for our nation’s economy,” he said.
The regulators acted on the same day that House Republicans announced their vision for overhauling the nation’s mortgage system, a month and a half after the Obama administration had revealed its plan to wind down Fannie and Freddie.
The GOP bills would raise borrower fees in two years, require Fannie and Freddie to begin selling their massive portfolios of mortgage investments, which ensure a steady supply of funding for mortgages, and take away other advantages that banks and other private firms do not have.
The measures would also formally end requirements that Fannie and Freddie direct a portion of their business to low- and moderate-income housing and pay their employees the same as their counterparts in the federal government earn.
Rep. Spencer Bachus (R-Ala.), chairman of the House Financial Services Committee, said the measures are intended “to create a well-functioning, private, competitive secondary mortgage market to price mortgages according to risk, be more innovative and efficient, and operate with less political interference.”
Neither the Obama administration nor the congressional Republicans have endorsed a long-term approach for replacing Fannie and Freddie.