In this report, we assess the status of the long-abandoned, but always-potent QRM standards mandated by Dodd-Frank. In 2011, we said that regulators would need to issue another proposal because the initial one, especially taken in concert with the rest of the risk-retention rule, had so many questions as to make finalization at best dubious under applicable administrative-procedures law. Now, the agencies have seen it our way, working on another proposal for the QRM, as well as the rest of the rule that, until finalized, quashes securitization across a wide array of asset classes. A new QRM proposal won’t settle matters, but it will circumscribe the parameters of mortgages so clearly subject to risk retention that markets will begin to sort the wheat from the chaff and, thus, start to structure secondary-market operations.
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