Community Bankers of Iowa Monthly Banker Update October 2013

Washington Watch Written By: Ann M. Grochala, Vice President of Lending & Housing Policy for ICBA Regulators Propose Expanded Exemptions From Credit Risk Retention Standards More than two years after releasing a proposal to ensure that securitizers retain an economic interest in the credit risk of the assets they securitize, financial regulators recently went back to the drawing board. In late August, regulators released a revised proposed qualified residential mortgage rule, or QRM rule, that requires securitizers that issue securities backed by certain mortgage loans to retain some of the risk of the loans. The good news for community banks is that the new QRM rule appears to be worth the wait—regulators took a softer touch than they did with the initial rule they proposed in March 2011. More loans would be exempt from the credit risk-retention standards, which will reduce the potential impact of the new rulemaking on the mortgage market. Time flies It’s been a couple years, so let’s back up and start from scratch. The proposed rule would implement the risk-retention standard established by the Dodd-Frank Wall Street Reform Act, which requires securitizers to retain at least 5 percent of any loan securitized, unless it is determined to be a “qualified” loan. While this would apply to any asset-backed securitization, most important for community banks are those consisting of residential mortgages. The question over which residential mortgages would be deemed QRMs, and receive the exemption has been the chief concern of many in the financial-services and housing industries. If standards were too strict, many traditional mortgage providers would be forced out of the housing market, restricting residential mortgage credit. For its part, ICBA urged regulators to scuttle the proposal and take a do-over. In an August 2011 comment letter, ICBA called on the agencies to broaden the definition of which loans qualify for an exemption from the risk-retention rules. Too narrow a def ???????????????q??????????????????????????t??EI5?????)??????????????????????????????????????????????????)?????????????????????????????????????% ????????)?????????????????????????????????????????????????)?????????????????????????????????????????????????)??????EI4??????????????????????????????????????????%???????????????????????????????E4????????????)????????)]????????????????????????????????q???????????????t???????????????????????????????????????????????????)????????Q???????????????????????????EI4??????????)??????????E4????????????????????????????? ??????)?????????A??????? ????e????????????????????)1????????????????????5?????????????5???????????)?????????????????????????????????????????????()?????)???)??????)??????????)???EI4)???????P)???????????????????????????????????????????????????????)????????????????????????????????????????% ?)?????????????????????????????????????????????????????????????????????????????????????????????)?????????????)Q?????????????????????????????????????????????????????????EI4???????????????????????????????????????)????????????????E4??????????????????????????????????????????????)5?????????)%?e?????????????????????????????????????????????????????????????????EI4?????????% ?????????)?????????????????????????????????????????????????????)????????????????????Q??????????????????????????((0

Community Bankers of Iowa Monthly Banker Update October 2013 | Página 7