A House Financial Services subcommittee has approved a bill that would establish a foundation for a new private-label securitization market for mortgages.

The bill, sponsored by Rep. Scott Garrett, R-N.J., authorizes the Federal Housing Finance Agency (FHFA) to establish underwriting standards for categories of mortgages that could be securitized through a to-be-announced (TBA) market.

It also requires the GSE regulator and the Securities and Exchange Commission to draw up standardized pooling and servicing documents, along with representations and warranties that require binding arbitration to resolve disputes between investors, issuers and servicers.

"Standard Reps and Warranties will provide the certainty that investors are looking for to get back into the market," subcommittee chairman Garrett said at the markup session that ended late Wednesday evening.

The subcommittee voted 18-15 to approve the bill, sending the measure to the full committee for further action.

The Garrett bill prohibits regulators from requiring servicers to write down the principal amount of a mortgage and repeals the risk retention requirements in the Dodd-Frank Act.

It also clarifies the "qualified mortgage" provisions in the Dodd-Frank Act and directs regulators to provide lenders with a safe harbor from lawsuits when they originate "high quality" mortgages that meet FHFA underwriting standards.

The subcommittee voted down an amendment to reinstate risk retention which would require securitizers to retain 5% of the credit risk.

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