Speakers at Information Management Network's ABS East who tackled the housing market harped on two topics in particular: the qualified residential mortgage (QRM) rule — which basically determines which private-label mortgages are subject to risk retention — and what they see as the unfair advantage that Fannie Mae and Freddie Mac  still enjoy over the private-label RMBS market.

“What we need is a level playing field in terms of regulation and economics between private label and the GSEs,” said Stephen Kudenholdt, the chair of the capital markets practice at SNR Denton. One suggestion he had for winding down the role of the GSEs was to raise the fees charged by these entities to guarantee new loans to “fair market value.”

QRM, which has yet to be finalized, could end up being less restrictive than what the market initially thought it would be, said James Egan, a securitized product strategist at Morgan Stanley. But he acknowledged that without a strict definition, lenders continue to originate to only borrowers with the most sterling credit.

Matt Tully, the chief of staff for congressman David Schweikert (R – Ariz.), said in looking at QRM, there was a concern among members of the House Financial Services Committee regarding the debt-to-income and down payment requirements as the rule has been proposed. A 20% down payment raised the question of how affordable housing would be first-time homebuyers, he added.

Schweikert, the conference keynote speaker, later asked the audience the rhetorical question: “You really think in a QM or QRM world you can compete with Fannie and Freddie?”

It appears that the private-label market is just starting to do just that — there was to be a good deal of buzz around the RMBS shelf filed by Shellpoint Partners — but most believed that this segment would remain anemic unless Fannie and Freddie stepped aside and QRM were relaxed.

In Kudenholtz’s opinion, QRM should end up being similar to, or the same, as QM, which basically establishes nothing more than the ability to pay of the borrower. “The bigger the difference is between these definitions, the easier it will be for the government to perpetuate its dominance of the mortgage market,” he said. “They should be a lender of last resort, not a lender of first resort.”

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