Banking Agencies Issue Final QRM Risk Retention Final Rule
By Anna DeSimone, President
October 21, 2014, the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), Federal Housing Finance Agency (FHFA), Department of Housing and Urban Development (HUD), Office of the Comptroller of the Currency (OCC) and Securities and Exchange Commission (SEC) issued a final rule implementing the credit risk retention requirements of Section 15G of the Securities Exchange Act, as added by section 941 of the Dodd-Frank Act.
Known as the “skin in the game rule” the decision requires banks to retain at least 5 percent of the risk on their books when securitizing loans. The rule also contained an exemption for ‘qualified mortgages’ and very similar to last year’s proposal. The new ruling introduces a periodic review of the definition stating which mortgages will qualify.
Section 15G of the Securities Exchange Act includes a variety of exemptions including an exemption for asset-back securities that are collateralized exclusively by residential mortgages that qualify as “qualified residential mortgages”.
This final rule is effective one year after the date of publication in the Federal Register with respect to asset-backed securities collateralized by residential mortgages and two years after the date of publication in the Federal Register with respect to all other classes of asset-backed securities
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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