WASHINGTON – Today, the U.S. Department of the Treasury issued the following statement from Secretary Tim Geithner on the release by regulatory agencies of a Notice of Proposed Rulemaking for the Dodd-Frank Wall Street Reform and Consumer Protection Act’s risk retention requirements. Risk retention generally requires that securitizers keep “skin in the game” by retaining at least 5 percent of the credit risk of an asset sold to investors through the securitization process. Under the Dodd-Frank Act, Secretary Geithner, in his capacity as chairperson of the Financial Stability Oversight Council, serves as the coordinator of the risk retention rulemaking process.
“Today’s announcement is an important next step in our ongoing efforts to fundamentally reform America’s housing finance market and our nation’s broader financial system.
“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. It is a critical component of the comprehensive housing finance reform plan that we put forward to strengthen consumer protection, provide greater transparency for investors, and help ensure taxpayers are never again put on the hook for private losses. Additionally, it will create better incentives across the broader securitization market, which will help support financial stability and sustainable economic growth.
“We appreciate the thoughtful work of the Office of the Comptroller of the Currency, the Department of Housing and Urban Development, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Federal Reserve Board, and the Securities and Exchange Commission as they consider this rulemaking. We look forward to continuing our work with these agencies as we move toward a final rule and implementation of these risk retention reforms.”