Federal regulators release risk-retention proposal

Another round of proposed credit risk-retention regulations, including a new definition of "qualified residential mortgage" (QRM) with modifications that the Credit Union National Association (CUNA) had urged, was released by the Federal Reserve (Fed), Federal Deposit Insurance Corp. (FDIC), and four other federal regulators on Wednesday, August 27.

However, CUNA has a number of concerns about the new 505-page proposal, which will be addressed in future comment letters to the agencies.  Comments are due October 30.

The proposed QRM definition would be identical to the definition adopted by the Consumer Financial Protection Bureau (CFPB) for a "qualified mortgage" (QM).  While CUNA noted this is a marked improvement from the original proposal, CUNA continues to seek additional latitude for credit unions under the CFPB's QM standards.  CUNA will press for such flexibility under the QRM proposal.

The agencies are also seeking comments on an alternative definition of QRM that would include underwriting standards.

Under the Dodd-Frank Act, credit unions are not directly covered by the QRM proposal.  However, CUNA has been weighing in with the various regulators on the QRM issues because there is a concern that the secondary market will conform to QRM standards and that examiners will expect federally insured institutions to meet QRM requirements.  

Any closed end loan secured by a dwelling would be under the proposal.

CUNA will post a Comment Call on the QRM provisions soon.

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.