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QRM/Risk Retention

Title IX of the Dodd Frank Act required that mortgage loans eligible for sale to the secondary market for securitization must include either a five percent risk retention requirement or meet standards exempting loans from risk retention.  These standards are to be developed jointly by the prudential bank regulators and the SEC, HUD, and the FHFA.  Loans meeting the new standard and exempt from risk retention are to be deemed Qualified Residential Mortgages (QRM).  The initial proposal issued by the regulator would have required QRM loans to have a minimum 20 percent downpayment requirement.  ABA and a broad coalition of lenders, realtors, homebuilders and consumer advocates opposed this proposal as too restrictive.

ABA's Position

ABA urged the regulators to establish a standard that mirrored the Qualified Mortgage standard developed by the CFPB.  On August 28, 2013 the regulators issued a re-proposal that largely adopts the QRM=QM approach advocated by ABA.  The proposal also sets forth a further alternative that would require an even greater downpayment of 30%.  This alternative approach is wholly unworkable, and ABA will submit comments on the reproposal supporting the QRM=QM approach and making clear that the higher downpayment approach is both unworkable and counter to good public policy.

​For more information please contact Joe Pigg

 Staff Contacts

  • Joe Pigg, Sr. Vice President/ 
    Sr. Counsel, ABA Mortgage Finance