A required review of credit risk retention requirements affecting federally insured banks and thrifts that securitize residential mortgage loans has been extended to Dec. 20 by federal banking, housing-finance, and securities regulators.
The credit risk retention rules were issued in 2014 to implement Securities Exchange Act requirements added under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Rules were finalized and published by the Office of the Comptroller of the Currency (OCC), Federal Reserve Board, Federal Deposit Insurance Corp. (FDIC), Federal Housing Finance Agency (FHFA), Securities and Exchange Commission (SEC), and Department of Housing and Urban Development (HUD).
This review is expected to cover the definition of qualified residential mortgage (QRM); the community-focused residential mortgage exemption; and the exemption for qualifying three-to-four-unit residential mortgage loans.
The agencies in 2014 said this review would consider, among other things, the results of any future review of, or changes to, the qualified mortgage (QM) definition published by the Consumer Financial Protection Bureau (CFPB).
Since the review began, the CFPB has published a revised, general QM definition and a new category of QM called the “seasoned” QM. The revised QM definition, with compliance required by this Oct. 1, removes the consumer debt-to-income ratio from the factors for a QM loan, replacing it with a new factor that uses the loan’s pricing.
Meanwhile, the bureau in February said it may “initiate a rulemaking to revisit” the “seasoned” QM. The seasoned QM definition, in place since March 1, was created for first-lien, fixed-rate covered transactions that have met certain performance requirements, are held in portfolio by the originating creditor or first purchaser for a 36-month period, comply with general restrictions on product features and points and fees, and meet certain underwriting requirements.