New Risk Retention Rule Could Prolong Housing Agony

HousingWire says according to Standard & Poor’s, the new risk retention rule will produce more stable mortgages in the long run, but the immediate effect will continue to suppress the housing market.  Federal regulators are proposing banks maintain a five percent risk in all loans that do not meet the standards of a qualified residential mortgage (QRM).  QRMs are loans on properties that are owner-occupied, have a 30-year amortization, and are a maximum of 80 percent loan to value.  Currently, 20 percent of mortgages meet this requirement.  Erkan Erturk, research analyst with S&P, said, “Fewer borrowers will meet these underwriting standards, which will reduce demand for housing and depress home prices even further.”


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