Coalition Protests Dodd-Frank Risk-Retention Rules

Bloomberg reports that legislators from both sides of the aisle, along with the American Bankers Association and 39 other groups, are protesting a draft rule known as the QRM standard. The rule, mandated by the Dodd-Frank Act, relates to the need for lenders and bond issuers to retain a five percent stake in securitized loans that are bundled for investors – with the exception of Qualified Residential Mortgages (QRM). The proposed rule, developed by six federal agencies, defined QRM as all mortgages except those where borrowers make a 20 percent down payment. Those objecting to the proposed rule say that it is inconsistent with Congressional intent, and could have the unintended consequence of raise the cost of mortgage credit and make it more difficult for consumers to purchase a home. The agencies involved in this rulemaking have extended the public comment deadline to August 1.