Magazine article Mortgage Banking , Vol. 71, No. 12
On Aug. 1, the Mortgage Bankers Association (MBA) sent a 39-page comment letter to the six federal regulators who proposed a credit risk-retention rule under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The letter petitioned the regulators to essentially start over on their proposed definition of a Qualified Residential Mortgage (QRM).
The letter stated, "MBA believes the proposed regulations and structure of the QRM deviate significantly from what Congress intended and are likely to have a dramatic impact on the housing finance system unless they are substantially revised."
Getting more to the point, MBA said, "[W]e believe the wholesale changes needed to rework the proposal merit the issuance of a revised proposal along with another round of comments prior to finalizing the rule in order to fine-tune and make further adjust ments as appropriate."
Another separate MBA comment letter covered the rule's impact on the commercial/multifamily securitization market, but the 39-page letter focused solely on securitized home loans.
MBA noted at the start of its letter that there appeared to be a schism among those interpreting the intent of the original risk-retention provision in the Dodd-Frank law. MBA noted some believe that Congress intended the QRM-eligible loans would be comprised of "a small subset of pristine loans" that would benefit from a risk-retention exemption, while the vast majority of home loans would be subject to risk retention. MBA argued that it believed congressional intent was contrary to that interpretation.
"Others, including MBA, believe that Congress intended to clearly demarcate and set apart riskier loans, and require risk retention on that subset. This framework envisions capturing within the QRM definition the products and practices that lower default risk, such as those that have re-emerged since the collapse of the housing finance market," MBA wrote.
MBA offered a list of its principal concerns regarding the pro posed QRM rule as it relates to residential mortgages. …