Regulators define "safe" home loan

It only stands to reason that "safe" must be defined by regulations since "unsafe" cannot be reflected by current prices. A distinction between the two does exist. Don’t expect this distinction to be recognized as long as the world struggles to service the “unsafe” kind.

WASHINGTON (Reuters) - U.S. lenders would have to offer mortgages with at least a 20 percent down payment if they want to repackage the loan to sell to other investors without keeping some of the risk on their books, according to a proposal U.S. bank regulators endorsed on Tuesday.

The Federal Deposit Insurance Corp board agreed to seek public comment on the proposal that is intended to restore lending discipline and define the safest form of mortgages that can be sold to investors.

Last year's Dodd-Frank financial law requires firms that package loans into securities -- a practice known as securitization -- to keep at least 5 percent of the credit risk on their books.

Source: finance.yahoo.com