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Tag Archives: QRM

Risk Retention Rule Nearing Completion

Federal Reserve governor Daniel Tarullo echoed Gruenberg's statement, though he was less concrete on a timeline: "I don't know whether I'd say by the end of the year, but I think we're definitely in the home stretch." As it was proposed in 2011, the rule originally called for securities issuers to hold on to 5 percent of a mortgage's risk after selling it unless the borrower made a 20 percent down payment.

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OCC Says Multi-Dimensional Risk Management Imperative for Industry

Speaking at an industry conference in Phoenix, Arizona, this week, Darrin Benhart, the OCC's deputy comptroller for credit and market risk, said the changing regulatory environment requires mortgage lenders to consider a number of potential risks on different fronts. Benhart acknowledged the list of mortgage-related reforms is extensive. ""These reforms mean you will need an even greater emphasis on risk management techniques that not only look at credit risk but also encompass operational and compliance risk,"" he said.

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Analysts Weigh in on Potential Impact of Proposed QRM Rule

Following the release of the revised Qualified Residential Mortgage (QRM) rule from six federal agencies, several analysts offered insight into how the revisions might benefit or impede progress in the mortgage market. Fitch Ratings believes adopting a QRM standard that mirrors the QM definition will trigger more activity for the jumbo origination and securitization market. Capital Economics, though, noted the QM and QRM proposals aren't much help when it comes to the long-term goal of reducing the presence of the GSEs in the mortgage market.

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Agencies Propose Revised QRM Rule

Six federal agencies jointly released their proposed QRM rule that would require lenders to retain risk when selling mortgage-backed securities (MBS). The new proposal was created in consideration of the industry's response to the original proposal issued in 2011. That proposal required lenders to keep a stake in the loans they sold in which borrowers were spending more than 36 percent of their income on payments and in loans with down payments of less than 20 percent. Under the new proposal, the 36 percent income threshold has been raised to 43 percent, and the revised rule also eliminates the down payment requirement.

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Experts See Risk of a Housing Bubble Resulting from Fed Policies

A majority of real estate experts responding to a recent Zillow survey expressed some concern that the Federal Reserve's current policies could lead to another housing bubble. Only 4 percent of respondents are not at all worried about a bubble resulting from the Fed's monetary policy that is keeping mortgage rates down. However, 48 percent see the Fed's policies as ""a little risky,"" and the remaining 48 percent categorized the risk as ""moderate to high risk."" Experts also expect prices to end this year 5.4 percent higher than their level at the start of the year.

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CFPB Offers Clarification for QM and Servicing Rules

As part of its ongoing efforts to assist the industry in the implementation of new mortgage guidelines, the Consumer Financial Protection Bureau (CFPB) issued proposed amendments to address questions and clarify the qualified mortgage (QM) and servicing rules first laid out in January. The proposal addresses five topics, including debt-to-income ratio concerns surrounding the Ability to Repay Rule, uncertainties around the temporary QM provision, and which criteria are used to define ""small servicers.""

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CoreLogic: QM, QRM Rules Remove 60% of Loans and 90% of the Risk

About 60 percent of loans written today would not be acceptable under the finalized rules for a qualified mortgage (QM) and the anticipated rules for a qualified residential mortgage (QRM), according to new research from CoreLogic. CoreLogic analyzed 2.2 million loans written in 2010 to determine what percentage of them meets QM and QRM guidelines. But, CoreLogic still concluded that ""[w]hile QM and QRM remove 60 percent of loans, they remove 90 percent of the risk.""

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Comptroller Addresses Role of Securitzation Market in Speech

Conditions in the housing sector may have finally improved enough to bring life back to the securitization market, Comptroller of the Currency Thomas Curry said in remarks at the American Securitization Forum. Curry noted that the credit market has shifted dramatically in its efforts to prevent the practices that paved the way for the financial meltdown but has gone too far--an expected reaction, he said. However, as the market stabilizes, it will become important for lenders to adjust appropriately and find a balance.

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Fitch: QM Rule to Benefit Jumbo Prime Market

Now that the industry has its long-awaited ""qualified mortgage"" (QM) definition, Fitch Ratings believes jumbo prime securities are poised to see a jump start. While many analysts anticipate a kick start in lending and securitization now that the rules are clear, Fitch asserts most of the underwriting guidelines suggested have already been put into practice since the financial crisis. However, the ratings agency sees the QM definition as a boon for the jumbo prime market.

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Capital Economics Says QM Rules Won’t Hinder Recovery

The long-awaited definition of the Consumer Financial Protection Bureau's (CFPB) ability to repay rule and qualified mortgage standards have been unveiled, and Capital Economics says the new rules will not hamper the housing recovery. Previously, some concern circulated the industry that the qualified mortgage rule would be too limiting, possibly shutting reasonably safe borrowers out of the market and stalling a market recovery.

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