September 4, 2013
Advisedly, sustainability is the sum of its parts and the rule of banking and security follow. The ability to secure capital through mortgage, auto and commercial are risk associated. The risk provided is secured for release. Collaborative “Agencies revise proposed risk retention rule” that may enhance lending to advance socioeconomics.
The Board of Governors of the Federal Reserve System reported the “Board of Governors of the Federal Reserve System, the Department of Housing and Urban Development, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission jointly revises a proposed rule the agencies issued in 2011 to implement the risk retention requirement in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).”
“The rule would provide asset-backed securities (ABS) sponsors with several options to satisfy the risk retention requirements. The original proposal generally measured compliance with the risk retention requirements based on the par value of securities issued in a securitization transaction and included a so-called premium capture provision” which now fair value measurements without a premium capture provision are proposed.
As required by the Dodd-Frank Act, the proposal would define “qualified residential mortgage” (QRM) and exempt securitizations of QRMs from risk retention. The new proposal would define QRMs to have the same meaning as the term qualified mortgages as defined by the Consumer Financial Protection Bureau.
“Similar to the original proposal, under the new proposal, securitizations of commercial loans, commercial mortgages, or automobile loans of low credit risk would not be subject to risk retention.”
Under the proposal guarantees from turbulent and under conservatorship, Fannie Mae and Freddie Mac apply to support capital matches by the U.S. Federal Government.
The role of these proposals can lead to freeing or constraining capital that expands or tightens the economy. The implication has linkage across the supply chain that will stimulate the economy or have an opposite effect. A slow skewed economy requires an opening for capital to support exchange, innovation and a healthy economy. The opposite is a log jam that dams the flow of capital preventing the growth of businesses within the Tier II and III within the supply chain.
Note: The agencies are requesting comment on the revised proposed rule by October 30, 2013.