Federal regulators may relax some rules on lenders holding stakes in certain kinds of mortgage securities
Federal regulators may relax some rules on lenders holding stakes in certain kinds of mortgage securities, according to a Monday Market Watch report.
The Federal Reserve and other regulators are expected to put forth a plan for the Qualified Residential Mortgage Rule that would soften a prior proposal that called for lenders to keep a financial stake in mortgages with down payments of less than 20%.
Both industry groups and consumer advocates have expressed concerns about the proposal, saying it would prevent many otherwise-eligible borrowers from getting credit.
“(M)andating large down payments would be a mistake for business and consumers,” the Center for Responsible Lending wrote in a statement last year. “…A 20% down payment would exclude 60% of creditworthy borrowers.”
“It is essential that any risk retention requirement protect investors from unsustainable lending practices while not unnecessarily restricting consumers’ access to credit,” a report from the Mortgage Bankers Association agreed.
The new proposal would still call for lenders to keep a 5% stake in loans that don’t qualify as QRMs, according to Market Watch. The proposal is an attempt to discourage lenders from making loans to people with inadequate credit worthiness.
