Six federal agencies have issued a notice revising a proposed rule requiring sponsors of securitization transactions to retain risk in those transactions. The new proposal revises a proposed rule the agencies issued in 2011 to implement the risk retention requirement in the Dodd-Frank Act.
The proposal is being issued jointly by the Federal Reserve Board, the Department of Housing and Urban Development, the FDIC, the Federal Housing Finance Agency, the OCC, and the SEC.
The rule would provide asset-backed securities (ABS) sponsors with several options to satisfy the risk retention requirements. In addition, the agencies are proposing that risk retention generally be based on fair value measurements without a premium capture provision—a change from the original proposal.
As required by the Dodd-Frank Act, the proposal would define "qualified residential mortgage" (QRM) and exempt securitizations of QRMs from risk retention. The new proposal would define QRMs to have the same meaning as the term qualified mortgages as defined by the CFPB.
The new proposal also requests comment on an alternative definition of QRM that would include certain underwriting standards in addition to the qualified mortgage criteria.
Comments on the revised proposed rule are due October 30, 2013.