Battle Over Down Payment Requirements Still Looms in New QRM Plan
By Joe Adler
Bankers breathed a sigh of relief Wednesday after regulators unveiled a new proposal on securitization standards that omitted a controversial down payment requirement. But the agencies also made it clear that the debate over that issue is far from over. Tucked away inside the new, softer proposed criteria for “qualified residential mortgages” — which are exempt from credit risk retention — was a question about whether regulators should restore a down payment restriction, this time effectively suggesting a tougher 30% ratio. Although it was just a question — the reproposal included no down payment requirement — some regulators said it still deserved attention, and observers indicated it could be a sign the agencies may restore some kind of down payment restriction in a final rule. During a Federal Deposit Insurance Corp. board meeting on the issue, Vice Chairman Thomas Hoenig specifically cited the question, which asked whether regulators should set a maximum 70% loan-to-value ratio to qualify for QRM status. In a note following the release of Wednesday’s proposal, noted bank regulatory analyst Karen Shaw Petrou predicted deliberations between regulators about whether to include a down payment option will continue with a final outcome likely somewhere between the 2011 proposal and the latest version.