Homebuyers struggling to come up with a 20% downpayment can rely on relatives or others to put up half the money under a risk retention proposal federal regulators are about to unveil.
Regulators will demand that purchase money loans exempt from the 5% risk retention requirement of the Dodd-Frank Act must have 20% down. (See related stories on the NMN website.) On mortgages with lower downpayments, the securitizer will have to retain 5% of the credit risk.
On refinancings that meet the QRM test, regulators decided to go with a two-tiered approach, NMN has learned. In a refinancing, to reduce the term of the loan or interest rate, the combined loan-to-value ratio cannot exceed 75%.
In a cash-out refinancing, the combined LTV cannot exceed 70%.
Regulators are still working on the servicing standards that will be added to the risk retention rule. They agreed that servicers should disclose their ownership of second liens when they service the corresponding first lien. Servicers also must disclose their intent to modify the second loan when the first loan is modified.
Banking agencies hope to public unveil their proposal before April 18.
