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.
Comment Due Date: February 03, 2019
Keywords: Americas, US, Banking, Securities, Credit Risk, Credit Risk Retention, Qualified Residential Mortgage, Securitization, US Agencies
Previous ArticleSRB Issues Update on Resolution Actions for Banco Popular
EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.
The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.
In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.
In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.
EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).
ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).
EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.
HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.
EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.
BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.