Mortgage industry leaders sent a letter to financial regulators asking them to resketch any portions of Basel III that could hinder mortgage lending and increase the cost of originating home loans.
The Mortgage Bankers Association and several other industry groups sent the letter to Federal Reserve Chairman Ben Bernanke, Comptroller Thomas Curry and Federal Deposit Insurance Corp. leader Martin Gruenberg.
The letter asks for the suspension of portions of Basel III that are not explicitly required under the initial Basel III framework.
"The proposed U.S. version of the rule goes well beyond what the Basel Commission recommended with respect to capital treatment of real estate finance assets and will increase the cost of mortgage finance and reduce the availability of mortgage loans," said John Mechem, vice president of communications at the MBA.
The letter says capital charges against many well-underwritten loans held on the books of banking organizations would increase. The organizations also claim the market for private label mortgage-backed securities would be hampered, increasing the cost of mortgage loans while restricting the availability of mortgages.
The new rules on mortgage servicing assets would drive banks to reduce their servicing portfolios or cease servicing mortgage loans, the industry groups allege. It is possible this transition could create a disruption in the U.S. financial markets as hundreds of billions of dollars of servicing are moved without any assurance there is sufficient capacity from non-bank servicers, the letter suggests.
And so, the letter requests that implementation of certain U.S.-only provisions be deferred until further analysis of their impact can be completed. To see a full list of the requested deferred provisions, click here.
Finalizing the complete rule with all of the provisions would be harmful to the housing recovery, potentially limiting options and blocking efforts to restore private mortgage capital, the industry groups suggest. They also believe it could disrupt ongoing reforms of the government-supported secondary mortgage market.
The Federal Reserve declined to comment on the letter. The letter joins 1,200 other comments written specifically about Basel III's regulatory capital rules.