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Washington
Risk retention comment deadline extended to Aug. 1
WASHINGTON (6/8/11)--Comments on a joint federal agency proposal that aims to address abuses in the mortgage lending market by altering risk retention requirements will now be accepted until August 1. The previous deadline for comment on the risk retention provisions, which are required by the Dodd-Frank Wall Street Reform Act, was June 10. The Federal Deposit Insurance Corp., the Securities and Exchange Commission, the Office of the Comptroller of the Currency, the Federal Reserve, the Department of Housing and Urban Development, and the Federal Housing Finance Agency (FHFA) in a joint release said that the additional time was allotted to allow commenters more time to analyze the proposal and prepare their comments. The proposed rule, which was released in March, would require loan securitizers to retain a 5% economic interest in a material portion of the credit risk for any asset that they transfer, sell, or convey to a third party. Loan originators would generally be exempt from the credit risk retention requirements as long as they contribute less than 20% of the loans or other collateral to a given pool of asset-backed securities. The majority of credit unions would likely be exempted under this threshold. If the credit union’s or other mortgage originator's loans make up 20% or more of a pool of asset-backed securities, the originator would then be required to take on a portion of the loan securitizer's risk retention requirement in the same percentage amount as its contributions to the asset pool. Qualified residential mortgages and U.S. government-guaranteed mortgages, such as FHFA and Veterans Administration mortgages, would be exempt from all risk-retention requirements, and government-sponsored entities Fannie Mae and Freddie Mac would also be exempt from the securitzer risk-retention requirements for as long as those entities are held under government conservatorship. CUNA has said that while credit unions did not participate in the types of abusive practices that the rule seeks to address, it is concerned that credit union mortgage lending will be impacted by these rules and standards that develop in the marketplace. For the joint agency release, use the resource link.
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