Banks Keeping “Skin in the Game” May Reduce Mortgage Availability

By Kyle Chezum Updated on 12/13/2010

12/13/2010

Most major banks have faced at least criticism, if not major litigation, over the packaging of subprime loans into mortgage-backed-securities.  Now, policymakers are requiring that banks keep some skin in the game by retaining a certain amount of the risk surrounding the mortgages they package.  Experts expect that this may decrease the availability of some mortgage types.

The more conservative lending standards become, the fewer mortgages will close.  With the housing market starting to see new activity, this may hinder economic recovery.

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