MBAÕ Stevens: Final risk retention rule works for mortgage bankers

Alignment of QM and QRM helps lenders

The president and CEO of the Mortgage Bankers Association says he believes the final QRM definition issued today by the Federal Deposit Insurance Corporation will be a positive for the industry.

Speaking from the MBA’s 2014 annual convention and expo in Las Vegas, David Stevens, head of the MBA, said the final version of the rule that would require banks to retain at least 5% of the risk on their books when securitizing loans and align QM with QRM won’t strain an already challenging credit market.

The rule contains an exemption for Qualified Mortgages, along with a requirement for a periodic review of the definition and parameters for QM.

“We are pleased with the final risk retention rule as voted on by the FDIC today.  It’s positive for the housing market that the final QRM definition will generally mirror the qualified mortgage rule that lenders are operating under today,” Stevens said. “Doing such will likely not exacerbate the tight credit environment currently facing many borrowers. We are particularly pleased that regulators abandoned the concept of a restrictive down payment requirement that would have hurt many potential low-to- moderate and first-time homebuyers. 

"But it is important to realize that this rule will not have a significant impact in making mortgage credit more available, as there remain structural and market barriers that need to be addressed for the private label securities market to fully return,” Stevens said.

The final stage before adoption of the rule, which has been in the works since 2011, will be for it to be approved by the Federal Reserve and the Securities and Exchange Commission on Wednesday.

Earlier Tuesday, Federal Housing Finance Agency Director Mel Watt, along with the Credit Union National Association, the American Bankers Association, and the Structured Finance Industry Group weighed in, voicing qualified support.

“The rule also reflects significant changes from the initial proposed rule, which would have been highly detrimental to the commercial and multifamily real estate markets, with the Premium Capture Cash Reserve account being one element in particular that MBA strongly opposed and that has been removed. In addition, the final rule was responsive to MBA's position of providing greater flexibility for the permitted forms of risk retention,” Stevens said Tuesday afternoon.

“I would note that linking the QRM to the QM definition only reinforces the need to address the so-called ‘QM patch’ which affords QM status to any loan that can be sold to Fannie Mae or Freddie Mac,” he said. “Given the ongoing debate over GSE reform, policymakers need to ensure the QM definition can stand alone, independent of the future of the GSEs.”

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