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Federal Regulators Publish Final Risk-Retention Rule


nationalmortgagenews.com | December 26, 2014

By Brian Collins

Federal regulators formally issued a final risk retention rule for mortgage securitizations, a long-awaited and hotly debated measure that is nevertheless expected to have little market impact when it takes effect a year from now.

The six agencies published the rule with effective dates in the Federal Register on Wednesday, two months after they had all signed off on it.

The risk-retention provision of the Dodd-Frank Act of 2010 calls for issuers of mortgage-backed securities to retain 5% of the credit risk. This provision was designed to ensure the issuer has "skin in the game" and is penalized if the securitized loans go bad. But federal regulators, under pressure from Congress and industry groups, watered down the Qualified Residential Mortgage rule so that all government-backed loans and Qualified Mortgages are exempt from risk retention.

"Given the alignment of QRM with QM rules, as well as the rule's exemption for government-backed loans, we do not expect the risk retention rule to have a material impact on near-term originations," said Isaac Boltansky, an analyst at Compass Point Research and Trading.

"Over the longer-term, we view the finalization of the QRM rule as a positive for the mortgage finance landscape as it provides meaningful operational clarity which should ultimately lead additional capital to come off of the sidelines," Boltansky said.

However, the QRM risk retention rule could have an impact in the securitization of non-QM loans such as jumbo loans that are repackaged in the private-label market. But such impact won't be immediate, because the rule does not take effect until Dec. 24, 2015.

The risk-retention rule also covers other asset-backed securities such as auto loans and student loans. But the effective date of those provisions has been delayed for two years until Dec. 24, 2016.


Back to December 2014 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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