Wednesday, May 18, 2011

Banking and Consumer Groups Ask for Extension of Comment Period and Public Hearings on Risk Retention Proposals

Banking and consumer groups have asked that the comment period for proposed regulations implementing the risk retention and qualified residential mortgage provisions of Section 941 of the Dodd-Frank Act be extended until July 22, 2011. In a letter to the SEC and banking regulators, the groups said that a thorough response to the proposed regulations by affected entities will require significant data development, analysis and validation that cannot be reasonably completed by the June 10, 2011, comment deadline. For this and other reasons, they urged that the process for consideration of public views be broadened and the comment deadline extended. Specifically, the groups asked that the deadline be synchronized with that of the rulemaking on the ability to repay and qualified mortgage provisions under Dodd-Frank so that comments are due no earlier than July 22, 2011. Noting that these complex proposals require more than written comments, the groups ask that regional public hearings be held to solicit input. The letter was signed by, among others, the American Bankers Association and the Consumer Federation of America.

The groups noted that the risk retention proposals comprise nearly 400 printed pages and asks respondents to address almost 200 questions. It would broadly apply new risk retention requirements to all sponsors of securitizations of mortgages and other assets. At the same time, the proposed qualified residential mortgage exemption is narrowly designed and would require significantly higher down payments from borrowers and lower debt-to-income ratios than are required today. While the groups recognize that Dodd-Frank requires the adoption of risk retention rule within 270 days, the associations noted that the proposal was not issued until nearly all of that time elapsed. Under the circumstances, the public’s opportunity to respond should not suffer.

More substantively, the groups said that the qualified mortgage presumption-safe harbor under the ability to repay provisions of Dodd-Frank serves a parallel purpose to and requires consideration of many of the same concerns as the qualified residential mortgage. Like the QRM, which offers an exception from risk retention to encourage better-underwritten, more sustainable loans, the QM offers decreased liability for QM mortgages to achieve the same end. In order to prevent undue regulatory burden, emphasized the letter, both the QM and QRM should be consistent. In fact, Dodd-Frank requires that the QRM not be broader than the QM. Thus, the groups urged that issues under both rules be considered and addressed together by the public.

No comments: