US authorities were to release Thursday a plan to overhaul credit rules in a bid to stave off a repeat of devastating losses roiling the mortgage market and the economy, The Wall Street Journal reported. “Their recommendations extend to nearly every niche in the credit markets - from mortgage brokers to the Wall Street firms that package home loans into securities, to the credit rating firms that assess the risk of those securities, to the regulators who police the system,” the report said. “We aren't singling out any group of market participants because ... there were mistakes made by all,” including regulators, the Journal quoted Treasury Secretary Henry Paulson as saying in an interview. Paulson on Tuesday unveiled a new program to help homeowners facing foreclosure, backed by six leading mortgage companies. The plan would allow borrowers facing foreclosure an opportunity to pause the proceedings to work out payments or refinancing. The program, dubbed Project Lifeline, provides loan modification or refinancing and is aimed at “those facing the greatest immediate risk of losing their homes,” Paulson said at a news conference. Amid mortgage and housing markets woes, the US government has prepared a 150-billion-dollar package to stimulate its flagging economy, while the Federal Reserve has slashed interest rates several times since last September. Paulson on Thursday called for a wide-ranging overhaul of practices governing mortgage bankers, credit rating agencies and the trading of mortgage-backed securities. Paulson urged mortgage bankers, credit rating agencies and banks to tighten practices in a bid to avert a repeat of the deep credit crunch plaguing US and global financial markets. “The objective here is to get the balance right, regulation needs to catch up with innovation and help restore investor confidence but not go so far as to create new problems,” the Treasury chief said in a speech in Washington. The Treasury secretary unveiled a set of recommendations made by the President's Working Group on Financial Markets, a panel of top government officials charged with keeping a watchful eye on America's financial markets. Among the recommendations backed by the panel and Paulson is a call for federal and state regulators to strengthen oversight of mortgage lenders. State regulators should also implement “strong nationwide licensing standards” for mortgage brokers, the panel recommended. The blueprint unveiled by Paulson targets the mortgage and credit industry as well as some Wall Street banking practices that analysts say have triggered and deepened a widespread credit squeeze. Analysts say that lax lending standards led some mortgage firms to grant home loans to borrowers who did not have the means to meet their mortgage payments once interest rates increased. A wave of mortgage defaults in turn contributed to a ongoing slump in the US housing market which unleashed multibillion dollar losses for holders of mortgage-backed securities, some of which were given top investment grades by credit rating agencies. As the housing market's woes deepened it sparked further losses on mortgage-backed securities which had been heavily marketed by many Wall Street banks in recent years. The measures announced by Paulson would not be mandatory, but calls for voluntary compliance by state regulators, mortgage firms, credit rating agencies, banks and other financial market participants. “Credit rating agencies must enforce policies and procedures that manage and disclose conflicts of interest, and implement changes suggested by the SEC (Securities and Exchange Commission) review of conflict of interest issues,” Paulson said. The Treasury secretary said the recommendations should provide further guidance to improve market integrity, while boosting investor protections and lowering financial risks. But, he cautioned that “no silver bullet exists to prevent past excesses from recurring.” __
