Policy vs. Politics
As we read the details of the risk-retention NPR, it sets up a fascinating struggle between politics – regulators seem to recognize that they’ve laid out a weak case for the QRM=QM case – against policy backed even by data in the NPR that sides with the QM-plus option. However, despite the shaky preamble, QRM=QM also seems to be the agencies’ preferred choice on grounds that anything but it, combined with a continued GSE exemption, would roil a market they are afraid to touch.

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