Banking regulators recently unveiled a new proposal on securitization standards, leaving out a controversial 20 percent minimum down payment requirement. The agencies have signaled, however, that the issue of down payments is still on the table.
New, softer proposed criteria for qualified residential mortgages (QRMs) include a question about whether regulators should reinstate a down payment restriction, with an even more stringent ratio of 30 percent. The "re-proposal" did not actually include a down payment requirement; but some the discussion signals that the agencies could possibly restore some kind of down payment restriction in a final rule.
At issue is a Dodd-Frank Act provision that calls for securitizers to retain 5 percent credit risk of loans they sell to the secondary market. Under the law, regulators have authority to define QRMs, an ultra-safe class of loans that could avoid risk retention. This week's reproposal essentially would say that QRMs are the same as the qualified mortgages (QMs) defined by the Consumer Financial Protection Bureau as meeting its ability-to-repay standards. Gary Thomas, president of the National Association of Realtors, called the revised plan "a victory for homebuyers and the future of homeownership in this country;" but Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig said regulators should continue to look at whether just equating QM with QRM is adequate for the securitization rule.