Six federal agencies issue revised proposed rule requiring "securitizers" to retain risk


Six federal agencies issue revised proposed rule requiring “securitizers” to retain risk

Six federal agencies issue revised proposed rule requiring “securitizers” to retain risk

Joint Release                                                                    Board of Governors of the Federal Reserve System
                                                                        Department of Housing and Urban Development
                    Federal Deposit Insurance Corporation
 Federal Housing Finance Agency
      Office of Comptroller of the Currency
        Securities and Exchange Commission

For Immediate Release                                                                                                         August 28, 2013

Agencies Request Comment on Proposed Risk Retention Rule

Six federal agencies on Wednesday issued a notice revising a proposed rule requiring sponsors of securitization transactions to retain risk in those transactions.  The new proposal revises a proposed rule the agencies issued in 2011 to implement the risk retention requirement in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

This proposal is being issued jointly by 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. As provided under the statute, the Secretary of the Treasury, as Chairperson of the Financial Stability Oversight Council, played a coordinating role in the rulemaking. The rule would provide asset-backed securities (ABS) sponsors with several options to satisfy the risk retention requirements. The original proposal generally measured compliance with the risk retention requirements based on the par value of securities issued in a securitization transaction and included a so-called premium capture provision.  The agencies are now proposing that risk retention generally be based on fair value measurements without a premium capture provision.

As required by the Dodd-Frank Act, the proposal would define “qualified residential mortgage” (QRM) and exempt securitizations of QRMs from risk retention.  The new proposal would define QRMs to have the same meaning as the term qualified mortgages as defined by the Consumer Financial Protection Bureau.  The new proposal also requests comment on an alternative definition of QRM that would include certain underwriting standards in addition to the qualified mortgage criteria. 

Similar to the original proposal, under the new proposal, securitizations of commercial loans, commercial mortgages, or automobile loans of low credit risk would not be subject to risk retention.  Further, the rule would recognize the full guarantee on payments of principal and interest provided by Fannie Mae and Freddie Mac for their residential mortgage-backed securities as meeting the risk retention requirements while Fannie Mae and Freddie Mac are in conservatorship or receivership and have capital support from the U.S. government.  This provision also is unchanged from the original proposal.

The agencies are requesting comment on the revised proposed rule by October 30, 2013.

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Media Contacts:
Federal Reserve Board Eric Kollig   202-452-2955
FDIC    Andrew Gray   202-898-7192
FHFA    Stefanie Johnson  202-649-3030
HUD    Brian Sullivan   202-402-7527
OCC    Stephanie Collins  202-649-6870
SEC    Office of Public Affairs 202-551-4120

source: HUD

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2 Responses to “Six federal agencies issue revised proposed rule requiring “securitizers” to retain risk”

  1. Charles Reed says:

    Its because there was not underlying collateral for these securities as they are worthless! Fannie, Freddie and Ginnie Mae are in possession of blank Notes where there was not purchase and the securities in addition to being worthless are not even titled so you got trillion of dollars in mortgages that are not securing that securities!

  2. Sarah says:

    This sounds like reducing risk for people who have done harm, which is a bad thing. Why does the CFPB need to certify mortgages without preventing, or doing anything about loansharking?


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