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The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) became law on July 21, 2010. Section 941 of the Dodd-Frank Act requires financial institutions that securitize mortgages loans to retain at least 5 percent of the credit risk.

The Dodd-Frank Act requires lenders that securitize mortgage loans to retain 5% of the credit risk unless the mortgage is a Qualified Residential Mortgage (QRM) or is otherwise exempt. Six federal regulators originally issued a proposed rule that narrowly defined a QRM to require a 20% down payment, stringent debt-to-income ratios, and rigid credit standards. Late 2013, the rule was re-proposed to match the definition of a “QRM” with the definition of “QM”. 

In addition to the main proposal, regulators introduced an unfavorable alternative that would require buyers to put 30 percent down to qualify for a QRM loan, a restrictive measure that dramatically favors the wealthy.  NAR advocates for adoption of the preferred standard which is in line with the congressional intent of a QRM exemption that includes a wide variety of traditionally safe, well documented and properly underwritten products.