Bankers Consider New QRM Proposal a Win for Homeowners

Federal regulators on Wednesday announced a new proposal that aligns the definitions of two rules for mortgage lending standards that have concerned many mortgage industry members. 

The proposal, jointly released by six government agencies including the Federal Housing Finance Agency and the Department of Housing and Urban Development, would align standards for the qualified residential mortgage (QRM) and qualified mortgage (QM) rules.

“The new proposal would define QRMs to have the same meaning as the term qualified mortgages as defined by the Consumer Financial Protection Bureau,” said the agencies in the announcement. The Dodd-Frank Act mandated the QRM to require issuers of mortgage-backed securities (MBS) to retain some risk in order to protect MBS investors. 

Under the new proposal, risk retention would be based on fair value measurements without a premium capture provision. This is revised from an original proposal that measured compliance with the risk retention requirements based on the par value of securities issued in a securitization transaction, and included a premium capture provision. 

The mortgage and banking industry has been largely favorable to the proposal. 

“This [proposal] will encourage lenders to continue offering carefully underwritten QM loans, including those with lower down payments. As a result, it will help the economy and ensure the largest number of creditworthy borrowers are able to access safe, quality loan products at competitive prices,” said Frank Keating, president and CEO of the American Bankers Association, in a statement. “The proposed rule removes unnecessary risk retention and capital requirements, which would reduce the availability of low-risk loans.”

 Written by Alyssa Gerace

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