Regulators have decided to leave unchanged their definitions of qualified residential mortgage (QRM), the community-focused residential mortgage exemption, and the exemption for qualifying three-to-four-unit residential mortgage loans under their 2014 federal credit risk retention regulations.
The decision, based on a review of the rules that was begun in 2019, was published in Monday’s Federal Register.
In 2014, the Office of the Comptroller of the Currency (OCC), Federal Reserve Board, Federal Deposit Insurance Corp. (FDIC), Securities and Exchange Commission (SEC), Federal Housing Finance Agency (FHFA), and Department of Housing and Urban Development (HUD) published the joint rules on credit risk retention under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). The rules require generally that a securitizer of asset-backed securities retain not less than 5% of the credit risk of the assets collateralizing the asset-backed securities. There are several exemptions, including for asset-backed securities that are collateralized exclusively by residential mortgages that qualify as “qualified residential mortgages.”
In conducting their review, the agencies considered what has been learned since 2014 about whether the loan and borrower characteristics specified in the QRM definition are predictive of a lower risk of default; and assessed how mortgage credit access conditions have changed since 2014, using data from the rules’ effective date through the end of 2019.
Based on their findings, the agencies said they have decided, “at this time, not to propose to amend the definition of QRM, the community-focused residential mortgage exemption, or the exemption for qualifying three-to-four unit residential mortgage loans.”