June 11, 2014

Eased 'qualified residential mortgage' rule ahead

June 12, 2014 – A revised, less stringent interagency rule defining "qualified residential mortgages" is expected to be finalized in the coming months now that the Securities and Exchange Commission has removed its objection, according to reports.

The SEC agreed to the new rule with a concession "in which U.S. policy makers are expected to agree to re-evaluate, and potentially adjust, the rule two years after its effective date and every five years after that," The Wall Street Journal reported.

The revised standard is more relaxed then the initial rule introduced in 2011, which required lenders to retain 5 percent of the loans when they are securitized unless those loans were written to a new QRM standard. The proposed standard included, among other things, a down payment of at least 20 percent.

NAFCU opposed the risk retention requirements, as they would make participation in the securities market more difficult for credit unions. WSJ reported that under the revised rule, regulators won't require a down payment and will "include a broad exemption for banks and other issuers of mortgage-backed securities from having to retain a portion of the credit risk on their books."

Last year, the FDIC proposed a second interagency rule defining QRM. NAFCU, with 48 other groups in the Coalition for Sensible Housing Policy, wrote regulators in March 2013 urging them to synchronize the QRM definition with CFPB's QM definition. NAFCU also submitted its own comment letter on the proposal to the Federal Finance Housing Agency in October.

This new proposed rule would not apply to credit unions directly, but credit unions – as participants in the mortgage market – will feel the market effects of any final rule.