Clients will recall that we have long warned them not to count too fast on a cozy QRM=QM risk-retention rule. For this to work as hoped at any insured lender backed by the FDIC, a residential mortgage has to meet the agency’s “safe harbor” standards. If it doesn’t, then investors can’t count on access to collateral in the event of an FDIC receivership. The FDIC promised in 2010 to “auto-conform” the safe harbor to the risk-retention rules, but we have long advised that it might well not do so if risk-retention hawks – many of them perched at the FDIC – don’t like the final rule. As was made clear today, they don’t and they won’t.
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