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president's working group on financial markets makes recommendations March 13, 2008

Posted by Bradley in : Uncategorized , trackback

The President’s Working Group on Financial Markets issued a policy statement on financial market developments which sets out a number of recommendations for financial market regulation moving forward. The recommendations relate to a number of different issues: reforming the mortgage origination process in the United States; encouraging investors to exercise market discipline with respect to securitised credits; reforming credit rating agencies’ ratings processes for structured products; making global financial institutions address risk management issues; and improving prudential regulatory policies.

The mortgage origination recommendations are:

All states should implement strong nationwide licensing standards for mortgage brokers;
Federal and state regulators should strengthen and make consistent government oversight of entities that originate and fund mortgages and otherwise interface with customers in the mortgage origination process. All states should work towards adopting the principles set forth in the guidance developed by the federal regulators for nontraditional and subprime mortgage lending and ensure that effective enforcement mechanisms are in place to deal with noncompliance with such standards; and
The Federal Reserve should issue stronger consumer protection rules and mandate enhanced consumer protection disclosures, including disclosures that would make affordability over the life of the mortgage more transparent and that would facilitate comparison of the terms with those of alternative products. State and federal authorities should coordinate to enforce the rules evenly across all types of mortgage originators.

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