Regulators offer risk retention proposal

When finalized, the rules will implement a key provision of the Dodd-Frank financial reform law. The provision requires securitizers to keep some “skin in the game” when creating and selling securities, part of an attempt to prevent the widespread creation of risky securities that were promptly sold to other investors that plagued the market during the financial crisis.

“Risk retention will help promote better standards for underwriting and securitizing mortgages, which is good for the long-term health of the housing market and for our nation’s economy,” said Treasury Secretary Timothy Geithner in a statement Tuesday. “It is a critical component of the comprehensive housing finance reform plan that we put forward to strengthen consumer protection, provide greater transparency for investors, and help ensure taxpayers are never again put on the hook for private losses.”

The regulators are accepting public comments on the proposal until June 10.