US regulators have moved to boost the country’s housing recovery by softening new rules that would force banks to hold a slice of packaged mortgage loans.
Even though the
NCUA was not among six federal agencies who said Wednesday they will revise
their proposed qualified residential mortgage rules, credit unions could still
feel the effects of the change.
Regulators Propose Banks Retain More Risk When Securitizing Mortgages
Federal regulators on Wednesday proposed a revamped risk retention rule that would require banks to retain 5% of credit risk for any residential mortgages that they securitize and sell to investors, unless the mortgages meet certain criteria.
National Association of Realtors
The following is a statement by National Association of Realtors® President Gary Thomas:
"The re-proposed Qualified Residential Mortgage rule announced this morning is a victory for homebuyers and the future of homeownership in this country. This version of the QRM rule will give creditworthy buyers access to safe and affordable loan products without overly burdensome downpayment requirements.
"The new standards, which align with those applied to Qualified Mortgages, are stringent enough to protect consumers from unscrupulous lending practices while also creating new opportunities for private capital to reestablish itself as part of a robust and competitive mortgage market.
"Realtors® were among the most vocal opponents of the first QRM rule proposed in April 2011 because it would have denied millions of creditworthy Americans access to the lowest cost and safest mortgages. We applaud the regulators for removing the 20 percent downpayment requirement and for adopting reasonable credit and debt-to-income standards.
"In addition to the main proposal that we support today, regulators introduced an unfavorable alternative that would require buyers to put 30 percent down to qualify for a QRM loan, a restrictive measure that dramatically favors the wealthy. Research shows that it would take the average American more than 25 years to save enough money to buy a modest home with a 30 percent downpayment.
"Realtors® will continue to oppose any regulation that requires unreasonably high downpayments from consumers. We are committed to working on behalf of America's hardworking families to ensure that anyone who is able and willing to assume the responsibilities of owning a home has the opportunity to pursue that dream, now and into the future."
For more information and analysis of the QRM rule, visit the Qualified Residential Mortgage and Risk Retention topic page on Realtor.org.
The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
ABA Applauds QRM Rule Proposal
American Bankers Association
ABA president and CEO Frank Keating:
We applaud the proposed Qualified Residential Mortgage rule released by federal regulators today. Gratefully, the proposed rule aligns the QRM definition with the existing Qualified Mortgage rule. This will encourage lenders to continue offering carefully underwritten QM loans, including those with lower down payments. As a result, it will help the economy and ensure the largest number of creditworthy borrowers are able to access safe, quality loan products at competitive prices.
The proposed rule removes unnecessary risk retention and capital requirements, which would reduce the availability of low-risk loans.
The Mortgage Bankers Association is applauding regulators’ efforts to align the Qualified Mortgage and Qualified Residential Mortgage definitions while incorporating feedback from both the industry and customer advocacy groups into the new risk retention rule.
The re-proposed QRM rule reflects “how well the notice and comment process can work,” MBA’s president and CEO David Stevens wrote in a statement.
It recognizes the implications for consumers and the broad mortgage markets, following an “unanimous reaction from diverse groups within housing and real estate finance” who were concerned the rule “would have unduly constrained the availability of mortgage credit” for many first time homebuyers and borrowers without large downpayments, and prevented private capital from entering the market.
“The QM standard already clearly stipulates what is considered to be a safe and sound loan,” he noted, so the MBA strongly supports the core proposal.
Nonetheless the industry remains concerned that “regulators are still considering an alternative option that would add a 30% downpayment or equity requirement to the QRM definition,” which is a steep, unnecessary downpayment requirement that contradicts the purposes of the QRM standard and beyond severely impairing access to credit.
For example, since “the risk retention rule impacts other asset classes including commercial mortgage-backed securities,” the MBA applauds regulators for eliminating the Premium Capture Cash Reserve Account proposal that “would have required all issuer profits to be placed in a first-loss position,” and thus cut out the financial incentive for issuing CMBS.
National Association of Federal Credit Unions
National Association of Federal Credit Unions (NAFCU) Senior Vice President of Government Affairs and General Counsel Carrie Hunt issued the following statement based on today’s proposal issued by the Federal Deposit Insurance Corporation (FDIC) for its rule defining the definition of “qualified residential mortgages.”
appreciates the agencies’ adherence to our call to align the definition of
“qualified residential mortgages” with the CFPB’s definition of “qualified
mortgages.” While the second proposal is an improvement to the first, we
believe it will still have a negative downstream effect on credit
unions. As such, we will thoroughly study the proposal and work with the
FHFA and the other agencies to provide relief for credit unions from the rule’s
effect on their mortgage lending.”
WASHINGTON— Regulators have proposed a new version of mortgage rules that will give more Americans access to mortgage credit while helping to keep the mortgage finance system safe and sound. The National Housing Conference (NHC) applauds the six regulatory agencies for responding to the widespread sentiment against onerous down payment requirements and in favor of aligning major mortgages rules.
The proposal would align the qualified residential mortgage rule (QRM), part of the risk retention requirements of the Dodd-Frank law, with the qualified mortgage rule (QM), finalized earlier this year, which set standards for safe lending. An earlier version of QRM proposed a 20 percent down payment requirement for all QRM loans, which would have made low-down-payment loans to responsible low- and moderate-income borrowers much more difficult. NHC, along with a diverse coalition of many housing stakeholders, opposed the earlier down payment requirement and welcomes this new direction in policy.
“This new proposal shows that regulators listened to the comments from the wide range of stakeholders involved,” said Chris Estes, president and CEO of the National Housing Conference. “Aligning the QRM rule with the QM rules will allow more American families to become homeowners and ensures that housing markets can remain strong in the future. This is especially important for communities that are still rebuilding from the foreclosure crisis.”
The rule-making is not yet complete, however, and NHC urges regulators to move swiftly to finalize the rule once the second round of public comments is complete.
“The new direction regulators are taking is a very positive step, but the details will determine whether an average American family can purchase a home affordably,” said Ethan Handelman, NHC’s vice president for policy and advocacy. “NHC will bring together our members to take a careful look at the new proposed rule and offer comments to regulators to ensure that the new QRM makes sure that homeownership can be within reach of all responsible borrowers, not just those with accumulated wealth and pristine credit.”