Multiple Federal Agencies on Credit Risk Retention

SIFMA, the American Bankers Association (ABA), the ABA Securities Association, and The Financial Services Roundtable (FSR) provide comments to the Office of the Comptroller of the Currency (OCC), the Securities and Exchange Commission (SEC), the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), the Federal Housing Finance Agency (FHFA), and the U.S. Department of Housing and Urban Development (HUD) (collectively, the Agencies) on the Agencies’ proposed rule for credit risk retention.

Although the Associations continue to believe that in important ways the re-proposed rules should be revised to address the positions we set forth in this letter, they appreciate and support many aspects of the re-proposed rules. In particular, the Associations strongly support the following features of the re-proposed rules: 

1. the ability of sponsors to customize risk retention through any combination of vertical and horizontal interests; 
2. differing rules for differing types of asset-backed securities; 
3. removing the premium capture cash reserve account requirement; 
4. harmonizing the definition of “qualified residential mortgage” in the re-proposed rules with the definition of “qualified mortgage” from Section 129C of the Truth in Lending Act; and 
5. setting the maximum required retained risk at five percent (5%). 

In light of this, this letter focuses on recommendations that Associations believe would improve the re-proposed rules, while allowing asset securitization markets to continue to provide access to cost-effective credit to individuals and companies, and important capital markets investment alternatives for investors.