March 30, 2011 (Jeff Alan)
Shortly after the release of the proposed risk retention proposal by the various federal agencies, the Mortgage Bankers Association (MBA) released a statement expressing their concerns about the proposal. Although pleased with some of the proposals, calling proposed rules for commercial real estate financing as “workable,” the MBA expressed concerns about the new rules proposed for Qualified Residential Mortgages (QRM).
The response was authored by John A. Courson, President and CEO of the Mortgage Bankers Association. His response to the proposed QRM rules was:
“Related to risk retention for residential mortgages and the qualified residential mortgage (QRM) exemption, we do have concerns about the rigid and highly prescriptive nature of the proposed rule. We believe that such a narrow construct of the risk retention exemption would limit mortgage opportunities for qualified borrowers more than it would reduce the number of problem loans. Further, if the QRM were to be enacted as proposed, it could dramatically limit the role of independent mortgage banks and community lenders, who either don’t have the balance sheet capacity to hold loans or the capital to hold in reserve as retained risk, but have long histories of originating safe and well-underwritten mortgages.”
“While factors like downpayment, debt to income (DTI) ratio and past payment history can be accurate predictors of loan performance, we do not believe that each ought to be considered independently.”
“Rather, the rule should allow for consideration of a borrowers entire credit profile before determining whether risk retention is necessary on a given loan. For example, we believe that a lower downpayment loan could be less risky if a borrower has a strong history of making payments on time and if the borrower’s debt to income ratio is on the lower end of the scale. The rule should provide more flexibility in this regard.”
“While we believe that the exemption for loans sold to Fannie Mae and Freddie Mac while they remain in conservatorship will help provide liquidity during the current period of market instability, we do note that such an exemption does little to shrink the government’s footprint in the housing finance system and could slow the return of the private secondary mortgage market.”
You can read the full response on the Mortgage Bankers Associations website.
Tags: MBA, risk retention, QRM, residential mortgages, mortgage banks, down payments, debt-to-income, payment history, borrowers, credit profiles