Top officials push financial reform

Home loan industry to get more scrutiny

The proposals call for the companies that issue mortgage bonds -- called mortgage-backed securities -- to disclose more information about how they've verified the loans that underlie the bonds being offered to investors. This, however, stops short of holding the purchasers in the secondary market accountable for the loans they're buying and bundling.

Only recently was the Securities and Exchange Commission granted powers to regulate credit-rating agencies, which certify the soundness of companies that issue mortgage bonds.

Under yesterday's recommendations, the SEC will ask issuers of mortgage bonds to use different rating systems for the complex financial instruments that bundle loans into bonds. These ratings would differ from the ratings for conventional bonds.

The panel's report was released on the same day that the chairmen of the House Financial Services Committee and the Senate banking committee announced plans to introduce legislation to provide up to $300 billion in federal guarantees to help people who are in danger of losing their homes to foreclosure to refinance into affordable mortgages.

The latest foreclosure readings from the Mortgage Bankers Association show that 1 in every 20 home loans nationwide is past due. Against that backdrop, the chairmen of the Senate and House committees announced their plan to have the Federal Housing Administration insure at-risk loans that lenders have agreed to modify.