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    US Agencies Commence Review Under Credit Risk Retention Regulations

    December 20, 2019

    US Agencies (the Department of Housing and Urban Development or HUD, FDIC, FED, FHFA, OCC, and SEC) are providing notice of the commencement of the review of the definition of qualified residential mortgage, the exemption of community-focused residential mortgage, and the exemption for qualifying three-to-four unit residential mortgage loans, in each case as set forth in the Credit Risk Retention Regulations that have been adopted by the agencies. The credit risk retention regulations require FDIC, FED, OCC, and SEC, in consultation with the FHFA and HUD, to commence a review of the mentioned provisions of the credit risk retention regulations no later than December 24, 2019. Comments on the review must be received by February 03, 2020.

    In the Supplementary Information to the Credit Risk Retention Regulations, the agencies note that they were committing, in the final rule, to review the qualified residential mortgage definition at regular intervals to consider, among other things, changes in the mortgage and securitization market conditions and practices. This review might include the

    • Structure of securitizations
    • Relationship between, and roles undertaken by, the various transaction parties
    • Implications for investor protection and financial stability arising from the relationship between government-sponsored enterprise (GSE) markets and private-label markets
    • Trends in mortgage products in various markets and structures and how the qualified residential mortgage definition is affecting residential mortgage underwriting and securitization of residential mortgage loans under the evolving market conditions

    The Supplementary Information also states that the agencies would want the opportunity to consider the results of future reviews of, and any changes made to, the qualified mortgage definition by CFPB, any additional regulatory changes affecting securitization that are adopted by the agencies, as well as any changes to the structure and framework of the GSEs and those markets. The simultaneous review of the community focused lending exemption and the exemption for qualifying three-to-four unit residential mortgage loans will similarly allow the agencies to evaluate the advantages and disadvantages of these exemptions, as their respective markets evolve over time. The credit risk retention regulations have been codified under the following sections of the Code of Federal Regulations: 12 CFR part 43; 12 CFR part 244; 12 CFR part 373; 17 CFR part 246; 12 CFR part 1234; and 24 CFR part 267.

     

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    Comment Due Date: February 03, 2019

    Keywords: Americas, US, Banking, Securities, Credit Risk, Credit Risk Retention, Qualified Residential Mortgage, Securitization, US Agencies

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