August 21, 2013 / 9:52 PM / 7 years ago

Bank regulators to discuss "skin-in-the-game" lending rules

WASHINGTON (Reuters) - Bank regulators next week will consider a proposal designed to discourage risky lending by forcing banks to keep part of their loans on their books, even after selling them off to be bundled into securities.

The Federal Deposit Insurance Corp said on Wednesday that it will meet on August 28 to discuss the credit risk retention rule required by the 2010 Dodd-Frank Wall Street oversight law.

The “skin-in-the-game” rules call for lenders to keep 5 percent of securitized mortgages on their books, with the exception of the most basic loans. The requirement was first proposed in 2011, but has not yet been made final.

Many observers expect regulators to issue a new proposal that would exempt more loans, Reuters reported in July, citing sources familiar with the work of regulators.

The initial proposal said that for a loan to be exempt from the “skin-in-the-game” requirement, it would have to include a 20 percent down payment. Lenders said that was too harsh and could restrict credit for first-time and lower-income home buyers.

An FDIC spokesman did not immediately respond to requests for comment.

The FDIC, the Federal Reserve, the Securities and Exchange Commission, the Federal Housing Finance Agency, the Office of the Comptroller of the Currency and the Department of Housing and Urban Development all have a role in crafting the rules.

Reporting by Emily Stephenson; Editing by Karey Van Hall and Andre Grenon

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