Archive for the ‘credit’ Category
Dodd-Frank QRM Proposed Rules for Credit Risk Retention
Amid the frenzy surrounding implementation of the latest Loan Officer Compensation rules, on March 29, 2011 the mortgage industry received the initial of two major regulatory proposals issued in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). The proposed rule can be a start looking at details of the hotly debated “skin-in-the-game” requirements a part of Dodd-Frank. Pursuant to the telltale requirements, “sponsors” of asset-backed securities must retain 5% from the credit risk of the security’s collateral. Moreover, Dodd-Frank exempts some kinds of securitization transactions readily available risk retention requirements-among them, securities collateralized exclusively by “qualified residential mortgages.” The proposal also sets forth definitions for such key terms as “qualified residential mortgage” with which the mortgage lending industry is particularly interested.
Importantly, the proposed risk-retention rules permit “securitizers” to allocate a portion with the credit risk which must be retained for the originators with the securitized assets. As this concise explaination “originator” means the individual that creates a loan, exactly the original creditor of the loan (not just a subsequent purchaser) is definitely an originator when considering this rule. Because of the potential allocation of risk to original creditors, the mortgage lending industry carries a vested desire for the ultimate rules governing risk-retention requirements and may make possiblity to evaluate the proposal in their entirety and submit comments. Listed here are tips regarding the proposed definition of “Qualified Residential Mortgage” which, since non recourse will likely be assigned to the originator for these assets, is of particular concern to creditors seeking to avoid risk-retention altogether.
