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Regulators May Be Near Deal on Mortgage Risk Rules

At least two federal regulators confirm they have reached an agreement on the terms of a Qualified Residential Mortgage, according to government sources.

Mortgage
CNBC.com
Mortgage

A QRM would be exempt from risk retention standards required by the Dodd-Frank Act last year. Those standards direct banks to hold at least 5 percent of the loan's risk on their balance sheets before securitizing the loans and selling them off into the secondary market.

After much disagreement, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. have agreed on a 20 percent down payment standard for the QRM.

Other agencies, including the Federal Reserve Board, Securities and Exchange Commission, Department of Housing and Urban Development and the Federal Housing Finance Agency (overseer of Fannie Mae and Freddie Mac) have to agree to the final rule as well before it could take effect.

A banking industry group expressed some misgivings about the proposed down payment requirement.

"We would be concerned about a proposal that would require a large down payment without giving consideration for credit enhancements like mortgage insurance," a spokesman from the Mortgage Bankers Association spokesman told CNBC on Tuesday. "Requiring a large down payment would increase the cost of credit for many potential first-time homebuyers."

A high down payment requirement, like 20 percent, could push more borrowers to the Federal Housing Administration (FHA), which is currently trying to shrink its market share.

Sources also told CNBC that as part of the requirements, the borrowers would have to put down at least 10 percent of their own money; the remaining 10 percent could be a gift.

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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