The provision in the Dodd-Frank Act requiring financial institutions to retain 5% of the risk on loans they securitize exempts certain qualified-residential mortgages (QRMs) from the requirement.

NAR’s Position

NAR believes that Congress intended to create a broad QRM exemption, but the proposed rule narrowly defines QRMs.

NAR wants federal regulators to honor Congressional intent by crafting a QRM exemption that includes a wide variety of traditionally safe, well underwritten products such as 30-, 15-, and 10-year fixed-rate loans; 7-1 and 5-1 ARMs; and loans with down payments in the 5%-20% range with mortgage insurance, where required, and with other features found in low risk loans such as no prepayment penalties or balloon payments.

What NAR is Doing

In April, six federal regulators (the Fed, OCC, FDIC, SEC, HUD, and FHFA) jointly issued the proposed QRM rule. NAR submitted comments on the proposed rule on Aug. 1, 2011. NAR also partnered with a coalition of more than 40 consumer and trade organizations in submitting a joint letter.

Even before release of the proposed rule, NAR met with federal agencies, lenders, and consumer groups about the importance of a reasonable QRM definition, and it is continuing to do so.

NAR has also written several letters on its own and in partnership with other consumer and trade associations expressing concern over high-down payment requirements.