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U.S. Securities and Exchange Commission

The following Letter Type G, or variations thereof, was submitted by individuals or entities.

Letter Type G:

Re: Credit Risk Retention Re-Proposal

Dear Sirs and Madam:

On August 28, 2013, the Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System (the Board), Federal Deposit Insurance Corporation (FDIC), Securities and Exchange Commission (SEC), Federal Housing Finance Agency (FHFA), and the Department of Housing and Urban Development (HUD) (collectively, the Agencies) jointly issued a notice of proposed rulemaking (the Proposal) to implement 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank or the Act) regarding credit risk retention including the Qualified Residential Mortgage (QRM).

The Proposal is a re-proposal of a proposed rule issued in the spring of 2011 on this subject. After intense push-back, the Agencies re-proposed the rule in 2013. The 2013 re-proposal represents an improvement from the original because it aligns the QRM definition with the QM standard finalized earlier this year by the CFPB.

  • As the data demonstrate, the QM definition sets forth a rigorous standard for sustainable mortgage lending which result in borrowers' ability to repay and significantly lowers delinquencies and defaults;
  • Aligning the QRM and QM definitions will allow a greater number of borrowers to benefit from lower mortgage costs resulting from greater access to the private investor market, as well as safer and more sustainable loans;
  • Aligning the QRM definition with the QM standard will streamline the regulatory burden on an industry where the costs of regulation have become a great concern; and
  • The respective legislative intent of QRM and QM are well satisfied by the Agencies adoption of the same definition.

Despite the improvements, we have several concerns with the re-proposal. In particular, we are deeply concerned with the Alternative QM-Plus Approach. This Alternative would require a loan qualifying for the QRM exemption to have a 30% down payment and subject the borrower to onerous credit history requirements. The following are just some of the arguments against the Alternative:

  • The Alternative's inclusion of a down payment requirement is inconsistent with the legislative intent;
  • The Alternative restricts too many consumers' access to the most affordable credit available;
  • The Alternative would exclude a greater number of minority borrowers from the most competitive loans than the Preferred Approach;
  • The Alternative is unnecessary because the investor market can easily ascertain and price transparent credit attributes like loan-to-value ratio (LTV);
  • The Alternative will raise costs to borrowers. Consumers who do not qualify for QRM will pay higher prices for ever-scarcer private label credit; and
  • The Alternative of a more restrictive QRM will increase Government and agency involvement in the mortgage market when the Government's footprint and risk should be reduced.




Modified: 11/01/2013