“We are largely pleased with the Qualified Residential Mortgage rule…which will help ensure the largest number of creditworthy borrowers are able to access safe, quality loan products at competitive prices,” ABA president and CEO Frank Keating said about the QRM final rule.
The QRM rule, which is required by the Dodd-Frank Act to ensure loans sold into the secondary market are properly underwritten, aligned the definition of QRM with QM, as ABA has advocated. The agencies will review the definition of QRM periodically, and may request a review of the definition at any time.
In addition, the agencies are adopting the minimum risk retention requirements and risk retention options. The final rule applies a minimum 5% base risk retention requirement to all securitization transactions that are within the scope of the Exchange Act and prohibits the sponsor from hedging or otherwise transferring its retained interest prior to the applicable sunset date.
The final rule also allows a sponsor to satisfy its risk retention obligation by retaining an eligible vertical interest, an eligible horizontal residual interest, or any combination thereof as long as the amount of the eligible vertical interest and the amount of the eligible horizontal residual interest combined is no less than 5%.
Read the ABA press release.
Read the final rule.