Two major mortgage lender trade groups and the Federal National Mortgage Association strongly supported the Office of Thrift Supervision plan to lower to 50% from 100% the risk-weight of certain multifamily housing loans and to expand the category of privately issued mortgage-backed securities eligible for such weighting. OTS regulations now permit the 50% weighting only for multifamily loans with five to 36 units. The Savings and Community Bankers of America, the Mortgage Bankers Association and the Fannie Maewere among the commenters favoring the changes.
The principal changes sought by commenters included:
* Elimination of the requirement that to qualify for the 50% weight-risk category, multifamily projects must meet an 80% annual occupancy standard.
* Elimination of the 36-unit ceiling.
* Reclassification of loans to the 50% category if they ultimately meet the criteria, even if they did not at the time of origination.
* Consideration of reliable credit enhancements when establishing multifamily housing loan and securities criteria.
Fannie Mae's main focus was the proposed treatment of recourse sales involving non-pro rata risk sharing arrangements.
Prior to passage of the Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991, bank regulators adopted the general rule that the capital charge for the off-balancesheet exposure of an asset sold with recourse is based on the entire outstanding principal balance of the asset, regardless of actual recourse exposure. The Office of Thrift Supervision requires 100% risk-weight for assets sold with recourse, except when the amount of liability is less than the capital requirement for credit-risk exposure.
The RTC Refunding Act sought to set uniform standards, and directed the regulators to take into account loss sharing arrangements.
OTS has taken the position that this does not require any change in its current regulations.
Fannie Mae supported this position in its comment and complained that related proposed regulations by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation do not go far enough.