A New Cover
As we noted earlier today, the FRB has issued a seemingly technical FAQ liberalizing the treatment of certain credit-linked notes. Fed supervised banks that find this approach appealing – and we think several big ones will – thus now have a new way to achieve risk-based capital relief for mortgages akin to certain GSE CRT products.
The Quiescent QRM
Although there were signs earlier this year that the QRM risk-retention exemption might get a long-delayed overhaul, the agencies yesterday ducked any decisions. Thus, the QM=QRM construct continues unchanged except to the extent the QM gets narrower, the GSEs leave conservatorship, or other externalities affect what equals what for purposes of absolving MBS issuers from costly risk retention.