WASHINGTON One day after six federal agencies issued a notice revising a proposed rule requiring sponsors of securitization transactions to retain risk in those transactions, insiders questioned if the changes do much to help credit unions.
The U.S. Department of Housing and Urban Development, Federal Housing Finance Agency, Office of the Comptroller of the Currency, and the Securities and Exchange Commission joined the Fed and FDIC in releasing the proposed rule Wednesday. The new proposal revises a proposed rule the agencies issued in 2011 to implement the risk retention requirement in the Dodd-Frank Act.
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.
Janice Sheppard, SVP compliance and home loans for $295-million Southwest Airlines Federal Credit Union, Dallas, said while some of the revisions of QRM appear to be improved to align with the qualified mortgage initiatives, the information regarding securitization “appears complex and potentially difficult” to administer. “There does not appear to be an upside for credit unions,” she declared. “The continued risk retention requirements for those that sell on the secondary market will impose another layer of compliance costs and more regulatory burden. It is important for credit unions to watch these revisions and understand how these changes could potentially impact their home loan programs.”
Bob Dorsa, president of the Las Vegas-based American Credit Union Mortgage Association, told Credit Union Journal, “While the revised rulemaking is a step in the right direction, there still are many issues to discuss. The details in the proposed regulations still leave some gaps or reasons for worry for credit unions’ continuing ability to satisfy the mortgage lending needs of their members.”
As reported on Credit Union Journal online, CUNA has joined with other trade associations and financial institutions in requesting additional modifications be made to the definition of QRM, along with other changes to a 505-page proposal currently out for comment.
Although credit unions are not directly affected by the rules mandated by the Dodd-Frank Act, CU trade associations believe credit unions will be indirectly affected as the secondary market conforms to new rules.
The agencies are requesting comment on the proposed rule by Oct. 30.
