Seeking to implement a measure under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) intended to address market practices that some believe contributed to the housing and economic crisis in the country, federal regulators have proposed a rule that would likely prevent the housing market, and perhaps even the economy, from recovering. A regulatory proposal to implement risk retention rovisions under Dodd-Frank for asset-backed securities would establish a very narrow exception for conventional mortgage loans that would result in many consumers not being able to obtain affordable mortgage loans. If the narrow exception is implemented, residential mortgage lending would likely decline sharply as many consumers would be unable to qualify for loans to purchase homes or to refinance existing loans. It is imperative that members of the mortgage industry and other industries tied to mortgage lending and housing react to the proposal. This article focuses on the proposed definition of “qualified residential mortgage” (“QRM”) that would create the narrow exception for conventional mortgage loans from the risk retention requirements.
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Reprinted with permission from The Banking Law Journal.