New U.S. Rules to Cut Mortgage Risk, Improve Underwriting Practices

August 28, 2013
mortgage lending news

On Aug. 28, the U.S. Federal Deposit Insurance Corp (FDIC) will vote on whether to release for public comment a revised proposal to curtail risk in the mortgage market and limit poor underwriting practices that fueled the housing bubble. The rules would require lenders and bond insurers to hold a portion of the loans they pool and sell as securities, with the exception of those that are deemed low risk.

The new proposal is expected to loosen the definition of "qualified residential mortgages" by eliminating a 20 percent down payment requirement for those mortgages exempt from the regulations. The regulators are likely to align the "qualified residential mortgage" exemption up with the Consumer Financial Protection Bureau's standards for good mortgage underwriting, which includes loans that have low fees and that go to consumers who are not already carrying big debt loads. The six federal agencies -- including the FDIC, Federal Reserve, and HUD -- also plan to ask several other questions about the rules; and they hope to complete the risk retention rules by the end of 2013 before other, unrelated mortgage rules take effect early next year.

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