AIG lobbying for relaxation of state mortgage rules: WSJ

[JURIST] US insurance giant American International Group (AIG) [corporate website] is lobbying state governments to relax strict, recently enacted rules designed to provide greater oversight of the mortgage lending industry, the Wall Street Journal reported Thursday. The rules are contained in the S.A.F.E. Mortgage Licensing Act of 2008 [text, PDF], which was signed into law by President Bush at the end of July. The Act requires mortgage originators to be registered and licensed by state agencies. As part of the registration and licensing process, originators are required to undergo background checks, including fingerprint analysis by the Federal Bureau of Investigation (FBI) [official website], personal history checks, credit reporting, and investigation of originator's civil and criminal records. The Act also requires originators to undergo training on federal law and regulations, ethics, and lending standards for subprime mortgages, and to be tested on those subjects. According to the Wall Street Journal, AIG has been lobbying states to ease some of the state-imposed rules associated with the Act. Reuters has more.

AIG was the recipient of an $85 billion bridge loan from the US Federal Reserve [official website] due to financial instability due to subprime lending and the financial derivatives and mortgage-backed securities markets. Additionally, many current and former AIG executives blame the company's troubles on "mark-to-market" accounting rules [JURIST report]. The $85 billion bridge loan is intended to allow AIG time to sell off its assets in an orderly fashion in order to avoid the negative consequences of a bankruptcy or collapse during the current financial crisis. The bridge loan is intended to act in concert with the recently-passed $700 billion rescue bill [JURIST report] to limit the effects of the crisis on the larger US economy and international markets. Last month, members of Congress urged [JURIST report] regulatory changes and investigations following a stock market drop propelled by Lehman Brothers' Chapter 11 bankruptcy filing and the sale of Merrill Lynch.



 

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