Question:

It seems that a simple fix to one of the key causes of the current financial meltdown would be to create regulation or statute that requires mortgage originators to service the loans they originate through the life of the loan. Will you enact such legislation now?

Asked by: Michael Lauderdale from Chesterfield, VA

Asked of U.S. Rep. Barney Frank (D-MA) on Feb 24th, 2009
Categories: Economy. Tags: Banking reform · Banking regulation · mortgage loan origination.
36
votes
Answer:

Answer from: U.S. Rep. Barney Frank (D-MA)

We clearly need to change things. We need to have much more responsibility on the services. Whether or not the originator has to service it throughout—I don’t think that’s necessary to achieve the goal. It is important that whoever the servicer is have full rights to restructure the mortgage. So I think it’s acceptable to say it can be sold, as long as the originator—the originator should not be able to sell the entire responsibility for the loss—the originator should have to retain some of the risk. With that, if the originator sold it to a servicer but the servicer than had the full rights to write it down, wasn’t hindered by investor, that would work too. So I agree that we need very substantial change in the current model, and there needs to be much more responsibility on both originators and servicers, I don’t think it has to be done in that manner.

Answered on Jul 16th, 2009

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