March 9
- Effective Date Effective date of CFTC final rule on real-time public reporting of public swap transaction data
March 13
- Effective Date Effective date of CFTC final rule on swap data recordkeeping and reporting requirements
March 19
- Effective Date Effective date of CFTC final rule on registration of swap dealers and major swap participants
March 26
- Comments Due Comments due on annual OCC stress test
March 31
- Comments Due Comments due on enhanced prudential standards and early remediation requirements for covered companies
April 1
- Effective Date 4/1/12 – Effective date of FDIC final rule on resolution plans for insured depository institutions over $50 billion
Proposed QRM standards released but expected to have little impact
Despite the loud controversy, guidelines proposed Tuesday on the most controversial part of the Dodd-Frank Wall Street Reform and Consumer Protection Act's risk-retention mandates are expected to have negligible impact for years.
The proposed guidelines address "qualified residential mortgages" under section 941 of the Dodd-Frank Act.
But the ability of QRMs to lower lenders' capital standards on supposedly less risky loans will not kick in until Fannie Mae and Freddie Mac, which control 95 percent of the US residential mortgage market, are abolished. Until then, mortgages guaranteed by Fannie and Freddie will be exempt from the risk-retention mandate.
The House Financial Services Committee is expected to send bills weakening and eventually abolishing Fannie and Freddie to the floor next week, but the package's fate in the Senate is unclear, and any eventual putative laws may face a presidential veto.
The standards were contained in a joint notice of proposed rulemaking expected to be released for comment by late Wednesday by the Federal Reserve, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, the Office of the Comptroller of the Currency, the Federal Housing Finance Agency and the Department of Housing and Urban Development. Comments must be received by June 10.
To be eligible for an exemption from being required to hold at least five percent of each loan, securitized mortgages must only include loans where a borrower's debt-to-income ratio would be no higher than 28 percent for housing debt and 36 percent for overall debt. Housing debt includes real estate taxes, interest, principal, hazard insurance and other fees such as condominium association assessments.
Down payments must be at least 20 percent, at least half of which must be from the borrower's own funds rather than from loans, gifts from relatives or other sources. Mortgage insurance will not lower the down payment requirement, but one of the 174 questions asked during a pre-release comment period whether insurance should reduce the mandatory upfront payments.
A loan meeting the above requirements would be disqualified as a QRM if the borrower had been subject to a bankruptcy, foreclosure or repossession. QRMs would also be prohibited for interest-only or negative amortization mortgages.
A mortgage originator would be subject to the "skin in the game" obligation only if the lender responsible for the securitization Securitizer has to hold the risk retention unless the originator is responsible for originating 20 percent or more than loans in an ABS.
In a briefing with reporters, an FDIC official said the QRM standards would be simple for bank personnel to obey and compliance officers to enforce, adding, "It's easy to understand. It's a bright line definition; either you meet it or you don't."
For an ABS composed of commercial loans to be eligible for zero risk retention, the borrowers would have to have a total liabilities ratio of 50 percent at the most, a leverage ratio of no more than 3.0 and a debt service coverage ratio of no less than 1.5.
For auto loan ABSs to qualify, the borrowers' debt-to-income ratios could be no more than 36 percent and the buyers could have no loan payment delinquency of 30 days or more from bankruptcies and foreclosures within the previous 36 months. As with home loans, a 20 percent minimum down payment requirement would apply.
ABS loan servicers may not act to favor a particular tranche of investors, and must disclose any second-lien interests they have if they service the first lien. In such cases, servicers must disclose to investors in advance how the second lien will be dealt with if the first loan needs to be restructured.
The QRM requirements will have scant impact now, but American Bankers Association executive vice president for mortgage markets, financial management and public policy Bob Davis told Complinet they could significantly restrict mortgage lending when they become effective with the end of Fannie and Freddie.
Saying the rules will impose greater capital requirements on low-risk loans, which will reduce the ability of banks to offer mortgages, Davis urged Congress to allow regulators to impose risk retention requirements only for market stability.
Mortgage Bankers Association president and chief executive John Courson called the QRM guidelines "rigid and highly prescriptive."
Securities Industry and Financial Markets Association securitization group managing director Richard Dorfman commended the regulators for taking steps to carefully analyze the consumer, financial, market, accounting, and behavioral aspects of retention regulations.
"We support risk retention and we have for a long time," SIFMA spokesperson Katrina Cavalli told Complinet.
March 23