WASHINGTON, DC – January 13, 2011 – (RealEstateRama) — The American Bankers Association sent a letter today to the heads of the eight regulatory agencies involved in writing new rules on risk retention for mortgage loans as required by the Dodd/Frank Act. ABA supports a broad safe harbor, known as the Qualified Residential Mortgage or QRM, which would not be subject to risk retention requirements.ABA said imposing too broad a risk retention requirement is likely to cause lenders to leave the marketplace, reduce the amount of credit available to eligible borrowers, and harm the fragile economic recovery.
In the letter, Frank Keating, the new president and chief executive officer of ABA, said the regulators need to consider other legislative and regulatory efforts already undertaken when implementing risk retention requirements. The letter notes that the Dodd/Frank Act included many provisions intended to improve mortgage lending practices and that risk retention rules must be implemented in concert with these other rules.
“Using every new regulatory tool in isolation to correct every problem identified during the crisis will result in an over-regulated market that is unable to address the nation’s credit needs,” Keating said in the letter.
“It is imperative that the QRM exclusion provide a safe harbor for properly underwritten loans with a low risk of default – this includes the majority of loans being made by depository institutions today,” Keating said.
Keating also expressed ABA’s view that the QRM should not be used to address other policy concerns beyond improved underwriting – as mandated by the statute.
“We believe that defining the QRM exclusion narrowly to severely restrict loans from purchase by GSEs and therefore reduce their activities is an inappropriate use of the QRM exclusion,” Keating said. “GSE policy must be considered separately from the improved underwriting goals of risk retention.”
The entire letter is available here.
The American Bankers Association represents banks of all sizes and charters and is the voice for the nation’s $13 trillion banking industry and its two million employees. Learn more at aba.com.
ABA Media Contact:
Margot Mohsberg Johnson