Relaxed QRM Rules Expected Next Week

Federal regulators may finally produce the long anticipated market standardsrnfor Qualified Residential Mortgages (QRM), perhaps even as early as next week.  The new rules are designed to ensure thernquality of mortgages that are pooled and packaged into securities for sale torninvestors on the secondary market. rnInsiders expect that the final regulations will be more relaxed thanrnthose originally proposed, largely in response to demands by real estate andrnmortgage industry groups. </p

The 2010 Dodd-Frank Wall Street Reform andrnConsumer Protection Act required that lenders who made loans without governmentrnbacking with the intent to sell them on the secondary market be required to “keeprnskin in the game.”  That is to retain arnportion of each loan’s risk as an incentive to more closely monitor the qualityrnof the loans they planned to securitize. rn</p

Regulators including the FederalrnReserve, the Federal Deposit Insurance Corporation, the Securities and ExchangernCommission, and the Office of Comptroller of the Currency issued an initial setrnof rules in 2011 to set these risk sharing standards and set off an uproar fromrnindustry stakeholders and consumer groups. rn</p

Those rules would have required lendersrnto retain 5 percent of every loan unless the borrower put up a minimum of 20rnpercent as a down payment.  Thernregulators withdrew that proposal and submitted more relaxed rules for commentrnlast year.  It is anticipated that the newrnfinal regulations will be designed to ensure mortgage credit is broadly available.rn 

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