Johnny Isakson: “The committee did a great job to ensure subprime loans would never be made again by requiring risk retention of 5…”

“The committee did a great job to ensure subprime loans would never be made again by requiring risk retention of 5 percent. The only problem is they have called it on all loans, which meant there would be no mortgage loans. You would not have subprime, you would not have good loans because you cannot make it work with a 5-percent risk retention. As I have cautioned all of my colleagues, in the 1980s when the savings and loan industry failed, they had 100 percent risk retention. Risk retention is not the cure-all to good lending; underwriting is. The Senator from Louisiana and the other sponsors of this amendment are ensuring that people who have incomes that are verified, they will ensure that they have ratios that meet the tolerance levels for a qualified loan, meaning you are not borrowing more than you can pay back; they will ensure there is equity of 20 percent in every loan made, either through the downpayment being 20 percent or through whatever downpayment is made, having mortgage guarantee insurance on the amount above 80, and up to the downpayment, which is the way things used to work.”