The SEC, the Federal Reserve Board, the OCC, the Department of Housing and Urban Development, the FDIC and the Federal Housing Finance Agency (the "agencies") reassessed several provisions of the Credit Risk Retention Regulation, including (i) the definition of qualified residential mortgage, (ii) the community-focused residential mortgage exemption and (iii) the exemption for qualifying three-to-four-unit residential mortgage loans. Upon completing their review, the agencies decided not to propose any changes at this time.
As part of the Credit Risk Retention Regulations, federal banking agencies are required to review and reassess the definition of qualified residential mortgage ("QRM") periodically, taking into account developments in the residential mortgage market. During the review of the definition of QRM, the agencies confirmed that the current QRM definition was predictive of lower default rates and did not appear to be a material factor in credit conditions. Accordingly, the agencies did not propose to amend the definition of QRM.
Further, the agencies decided not to propose any changes to the community-focused residential mortgage exemption, stating that it serves the public interest by enabling safe, sustainable loans to be made available to low-to-moderate-income communities.
Similarly, the agencies decided not to make any changes to the exemption for qualifying three-to-four-unit residential mortgage loans. The agencies stated that the underlying properties are a source of affordable housing and, given the small amount of mortgages collateralized by three-to-four-unit properties, the exemption does not appear to be spurring any significant speculative activity in the securitization market.
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