Pending risk retention guidelines create more confusion in mortgage industry

The Dodd-Frank Bill has laid out a pathway for future operations in the financial services arena. However, the road has not yet been paved. The job of laying the pavement has been left to individual industry regulators who have 270 days from the date of passage to develop, write, publish, submit for comment and issue as final the regulation which will govern our business for the foreseeable future. This guidance giving, as opposed to concrete rulemaking, has created confusion in interpreting new risk retention rules. For instance it is believed that new risk retention regulations will not affect GSE loans. One should read carefully Section 941: “Regulation of Credit Risk Retention” in the Dodd-Frank bill (PAGE 516). It is the cornerstone of the financial foundation for mortgage bankers and will be the threshold for determining the quality of originations in the future.

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