The securitization process that led to the subprime meltdown has been "absolutely discredited" and retention of a portion of the credit risk is one way to reform the mortgage market, according to a Senate Banking Committee staffer.

Requiring lenders to retain 5% of the credit risk on nonprime loans, as proposed under a House bill, is "one way to get at the issue," said Jonathan Miller, a professional staff member. He works closely with committee chairman Christopher Dodd, D-Conn., on housing issues.

He stressed that mortgage reform also should give consumers a way to get relief if mortgage lenders violate the rules. Miller spoke at a Washington meeting of Real Estate Services Providers Council and he noted his views should not be interpreted as Dodd's views. But he said the Federal Reserve Board has resisted using its consumer protection authority until recently.

And the Fed could lose that authority by the time Congress passes a regulatory modernization bill.

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