Paulson reportedly to seek revamp of mortgage rules

NEW YORK - US policy makers, led by Treasury Secretary Henry Paulson, will recommend a revamp of rules on credit markets and mortgage brokers to help avoid a repeat of the recent credit crunch, the Wall Street Journal reported.

Paulson said in an interview that the President's Working Group of Financial Markets would recommend strengthening state and federal oversight of mortgage lenders and brokers.

The plan comes as the government and the Federal Reserve seek to fix debilitated US mortgage bond and housing markets.

Paulson is due to deliver a speech on financial markets at 10 a.m. today at the National Press Club.

The Working Group will recommend "strong nationwide licensing standards" for mortgage brokers and call on credit-rating firms and regulators to differentiate between ratings on complex structured products and conventional bonds, the report said.

The group will recommend that issuers of mortgage-backed securities disclose more about "the level and scope of due diligence" and about the underlying assets of the securities.

Global banking regulators will also be urged to revisit the latest version of bank capital requirements, known as Basel II, to ensure banks have sufficient capital, the report said.

"We are going to be mindful when we implement it to not create a burden," Paulson was quoted as saying. "But we think it's very appropriate to lay out some of the causes and some of the steps that need to be taken . . . to minimize the likelihood of this happening again."

The Wall Street Journal report said various government bodies had worked on the recommendations for over seven months and that Paulson and Federal Reserve chairman Ben Bernanke had "huddled" for half a day early this month to review the details of the overhaul.