Mortgage Bankers Praise Risk Retention Comment Extension

The ""Mortgage Bankers Association"":http://www.mortgagebankers.org (MBA) released a statement on Tuesday praising a last-minute extension of the comment deadline for the Dodd-Frank Act's controversial risk-retention rule that opponents charge will make mortgages more expensive for homebuyers.

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""MBA is very pleased that the regulators decided to allow more time for stakeholders to better understand the full scope of the proposed rules and how they will affect borrowers and lenders,"" the organization said in the statement.

""While not having an immediate short-term impact, these rules will have a profound long-term effect on how we finance residential, commercial, and multifamily real estate in this country,"" the statement added.

The risk-retention rule is one of the more controversial elements of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which President Barack Obama signed into law in July last year.

The Dodd-Frank Act riled banking, real estate, and mortgage industry practitioners by, among other things, instituting a new federal regulatory agency, stipulating strict compliance measures for derivatives and securitization markets, and requiring changes in corporate governance law.

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According to _Reuters_, the risk-retention rule will require loan originators to shoulder 5 percent of the costs for mortgages packaged and sold to other firms as securities if those mortgages fail to fit the definition of a Qualified Residential Mortgage (QRM). By the same token, if a mortgage meets the Dodd-Frank Act's QRM criteria, regulators will exempt lenders from the law's risk-retention provision.

Added to the Dodd-Frank Act under pressure from senators, as reported by _The Wall Street Journal_, some industry insiders warn that the QRM rule would limit lenders from continuing mortgage deals that ultimately benefit lower-income homebuyers and families.

As issued in two proposals for comment, regulators will decide which loans fit QRM criteria by calculating loan-to-risk ratios that require a 20 percent down payment in some cases and 10 percent in others.

Proponents of the QRM proposal argue that lax rules allowed lenders to securitize and sell high-risk loans as bundles without any assumption of the risk in the run-up to the 2008 housing and financial crisis, letting the ultimate cost roll over to investors.

In its statement, the MBA said that tighter rules on QRMs ""will define who will and who will not get the most affordable mortgage products, potentially prohibiting a significant segment of qualified borrowers from being able to achieve homeownership. For commercial and multifamily real estate transactions, these rules will affect the flow of private capital back into those markets.""

On Monday, several government agencies and departments ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô among them, the FDIC, Federal Housing Finance Agency, Federal Reserve, Office of the Comptroller of the Currency, Securities and Exchange Commission, and HUD ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô agreed to extend the deadline for commentary on the QRM exemption.

The agencies had originally mandated a June 10 deadline for commentary on the proposed exemption. That's now been extended through August 1.