The final version of the risk retention rule is now officially approved by six federal agencies, following the Federal Reserve’s last approval on Wednesday.
The Board of Governors of the Federal Reserve System, the Department of Housing and Urban Development, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Office of the Comptroller of the Currency and the Securities and Exchange Commission jointly issued the final rule.
As provided under the Dodd-Frank Act, the Secretary of the Treasury, as chairperson of the Financial Stability Oversight Council, played a coordinating role in the joint agency rulemaking.
On Tuesday, the FDIC issued the final version of the rule that would require banks to retain at least 5% of the risk on their books when securitizing loans. Then on Wednesday both the SEC and Fed approved the final rule.
The rule contains an exemption for Qualified Mortgages similar to when the rule was proposed in 2013, along with a requirement for a periodic review of the definition and parameters for QM.
Agencies are required to review the definition of QRM no later than four years after the effective date of the rule with respect to the securitization of residential mortgages and every five years thereafter, and each agency is allowed to request a review of the definition at any time.
“This cross agency effort affirms the Administration's commitment to creating needed certainty for lenders to expand access to credit for our nation's underserved borrowers, while ensuring that the past abuses that helped cause the last financial crisis aren’t repeated,” HUD Secretary Julián Castro said.
“We believe that these steps will help create additional opportunity for more Americans to fulfill their dreams of homeownership,” Castro added.
The final rule will be effective one year after publication in the Federal Register for residential mortgage-backed securitizations and two years after publication for all other securitization types.