Federal agencies decide not to change provisions of credit risk retention regulations Finance and banking

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United States: Federal agencies decide not to change provisions of credit risk retention regulations

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The SEC, Federal Reserve Board, OCC, Department of Housing and Urban Development, FDIC, and Federal Housing Finance Agency (the “Agencies”) have reassessed several provisions of the Credit Risk Retention Regulation, including (i) the definition of qualifying residential mortgage, (ii) the community-based residential mortgage exemption and (iii) the exemption for qualifying three to four unit residential mortgages. After completing their review, the agencies have decided not to propose any changes at this time.

As part of the Credit Risk Retention Regulations, federal banking agencies are required to periodically review and reassess the definition of a qualified residential mortgage (“QRM”), taking into account changes in the residential mortgage market. . When reviewing the definition of QRM, the agencies confirmed that the current definition of QRM was predictive of lower default rates and did not appear to be a significant driver of credit conditions. Accordingly, the agencies did not propose to change the definition of QRM.

In addition, the agencies have decided not to propose any changes to the community-focused residential mortgage exemption, stating that it serves the public interest by enabling safe and sustainable lending to be made available to low-income communities. to moderate.

Similarly, the agencies have decided not to change the exemption for qualifying three to four unit residential mortgages. The agencies said the underlying properties are a source of affordable housing and, given the small amount of mortgages secured by three- to four-unit properties, the exemption does not appear to be stimulating significant speculative activity in the market. securitization.

Primary sources

  1. SEC, FRB, OCC, HUD, FDIC, and FHFA: Credit Risk Retention – Notification of Determination of Review

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