Morgage-backed securities, Secondary Mortgage Market Enhancement Act


Title I of the 1984 the Secondary Mortgage Market Enhancement Act (SMMEA) was designed to remove some of the regulatory barriers that previously inhibited the development of a private market for mortgage-backed securities. Section 106 of Title I, which provided for federal regulation, preempted blue sky laws requiring registration of mortgage-backed securities and regulatory statutes affecting investment in mortgage-backed securities by state-chartered financial institutions. This Note examines whether the states should enact legislation to override the federal preemptions. Initially, this Note provides an overview of the secondary market for home mortgages by examining the factors leading to the enactment of SMMEA. It then examines the scope and rationale behind the section 106 preemptions. Finally, this Note juxtaposes the policies and objectives underlying state legal investment and blue sky laws with the section 106 preemptions." Based on that analysis, this Note concludes that the enactment of override legislation is required to protect potential mortgage-backed security investors from fraud and from speculative securities and to preserve the fiscal welfare of state-chartered financial institutions.



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