RJ and Makay

A recent inquiry by Senators Carl Levin and Tom Coburn has yielded 19 recommendations to deal with high-risk lending, regulatory failures, inflated credit ratings, and investment bank abuses. The recommendations, published on April 13, are as follows.

High risk lending:

1. Ensure "Qualified Mortgages" Are Low Risk - Federal regulators should use their regulatory authority to ensure that all mortgages deemed to be "qualified residential mortgages" have a low risk of delinquency or default.
2. Require Meaningful Risk Retention - Federal regulators should issue a strong risk retention requirement under Section 941 by requiring the retention of not less than a 5% credit risk in each, or a representative sample of, an asset backed securitization's tranches, and by barring a hedging offset for a reasonable but limited period of time.

3. Safeguard Against High Risk Products - Federal banking regulators should safeguard taxpayer dollars by requiring banks with high risk structured finance products, including complex products with little or no reliable performance data, to meet conservative loss reserve, liquidity, and capital requirements.

In an odd trend that has persisted for several years now, consumers have been keeping up with their credit card payments even when they're behind on their mortgage, says credit reporting firm TransUnion.

Among consumers with a mortgage and at least one credit card in the fourth quarter of 2010, 7% were 30 or more days late on the mortgage but current on their credit card, TransUnion reports. That rate was about 4% in the first quarter of 2008, when the trend first appeared nationally.

With mortgage rates at their lowest since the end of January, mortgage applications were up last week as borrowers looked to refinance. The Mortgage Bankers Association (MBA) index of loan applications rose 13% in the week ended February 18 after dropping the prior week to its lowest point since November 2008. Meanwhile, the association's refinancing measure jumped 18% and its purchase gauge rose 5.1%.

“Refinancing is more sensitive [than purchases] to fluctuations in rates,” observes Paul Dales, a senior economist at Capital Economics Ltd. However, Dales says he expects refinancing to remain soft, with sales at historically depressed levels, for two or three years.