MBA Applauds Risk Retention Re-Proposal but Concerns Remain

The Mortgage Bankers Association is applauding regulators’ efforts to align the Qualified Mortgage and Qualified Residential Mortgage definitions while incorporating feedback from both the industry and customer advocacy groups into the new risk retention rule.

The re-proposed QRM rule reflects “how well the notice and comment process can work,” MBA’s president and CEO David Stevens wrote in a statement.

It recognizes the implications for consumers and the broad mortgage markets, following an “unanimous reaction from diverse groups within housing and real estate finance” who were concerned the rule “would have unduly constrained the availability of mortgage credit” for many first time homebuyers and borrowers without large downpayments, and prevented private capital from entering the market.

“The QM standard already clearly stipulates what is considered to be a safe and sound loan,” he noted, so the MBA strongly supports the core proposal.  

Nonetheless the industry remains concerned that “regulators are still considering an alternative option that would add a 30% downpayment or equity requirement to the QRM definition,” which is a steep, unnecessary downpayment requirement that contradicts the purposes of the QRM standard and beyond severely impairing access to credit. 

For example, since “the risk retention rule impacts other asset classes including commercial mortgage-backed securities,” the MBA applauds regulators for eliminating the Premium Capture Cash Reserve Account proposal that “would have required all issuer profits to be placed in a first-loss position,” and thus cut out the financial incentive for issuing CMBS.