Mortgage bankers back Basel III endgame re-proposal

The housing finance industry is breathing a little easier following Federal Reserve Vice Chair Michael Barr's plans to ease up on some proposed bank capital rules, including those that impact mortgages.

"We support Vice Chair Barr's recommendations to recalibrate some provisions that would have had negative impacts on single-family housing and commercial real estate finance markets," Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said in a press release. 

Barr has expressly backed off a portion of the proposed regulation that would have increased the U.S. risk weighting on certain mortgages to above the level required under global Basel capital rules.

"I will recommend that we reduce the calibration for residential real estate exposures so that it is in line with the calibration developed in the Basel process," Barr said in his speech at the Brookings Institute on Tuesday. "With this change, all-in capital requirements, including for operational and credit risk, will be lower on average than they are currently for mortgages up to 90% loan-to-value ratio, and about the same as they are now for mortgages up to 100%."

The MBA had feared that additional risk weighting for single-family mortgages would have driven banks further away from mortgages and was particularly concerned that borrowers who make lower down payment because of income constraints could be affected.

"We will continue to advocate for a bank capital framework — including reduced risk-weighting for mortgage servicing rights and warehouse lines — that ensures safety and soundness without reducing mortgage market participation," Broeksmit said.