Industry Still Pressing for Risk Retention Changes

The Senate is moving closer to voting on a financial services regulatory reform bill and industry groups are pressing hard on the risk retention issue to get a qualified mortgage exemption. The current version of the bill requires securitizers to retain up to 5% of the credit risk with some of that risk shared with lenders. Industry groups are urging Senate Banking Committee leaders to give regulators more flexibility in determining risk retention requirements on different mortgage types. But they also want certain loans to be totally exempt from risk retention. "To ensure a liquid and efficient market for core mortgages, we think it is imperative that a mandatory 'zero' risk category be created for 'qualified mortgages' -- those that meet minimum standards for safely underwritten residential mortgages," says a letter penned by five trade groups: The Financial Services Roundtable, Mortgage Bankers Association, National Association of Home Builders, Community Mortgage Lenders of America and Community Mortgage Banking Project. In a separate letter, the MBA warned that the future of small independent mortgage bankers would be threatened if they are forced to retain a percentage of the loan amount on their books. Without a qualified mortgage exemption, these small local lenders might have to shut their doors and between 45,000 to 50,000 jobs could be at risk, MBA senior vice president Steve O'Connor told National Mortgage News. Final changes to the bill are expected to be worked out this weekend as the Senate prepares for a test vote on Monday evening.