The Center for Responsible Lending submitted a comment to the Board of Governors of the Federal Reserve System (Federal Reserve Board), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) regarding the large bank regulatory capital rule. While we commend the Agencies for seeking input on this important topic, we have significant concerns with the existing proposal’s potentially chilling impact on portfolio mortgage lending by larger banking participants.

As written, the proposed rule would significantly increase the capital required for larger banking organizations that hold mortgages in portfolio. Currently, the risk weight on owner-occupied residential mortgages is a uniform 50%. The agencies’ proposal, however, would retain or decrease the risk weight for mortgages with an LTV ratio equal to or below 80%, while increasing the risk weight to 60% for mortgages with an LTV ratio of 80-90% and to 70% for mortgages with an LTV ratio of 90-100%. For the reasons discussed below, we believe that result would unnecessarily restrain responsible access to mortgage credit for several consumers without producing any meaningful reduction in market risk.

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