Lawmakers pressed Federal Reserve Board Chairman Ben Bernanke on Wednesday about whether regulators have the legal authority to include servicing standards within a risk-retention rule.
"Do you know what legal authority [there is] for them to require servicing requirements in the" qualifying residential mortgage test? asked Rep. Scott Garrett, R-N.J.
The Fed chairman did not respond directly, saying he would need to provide an answer at a later date on regulators' precise legal authority.
"The law gives banking agencies the ability to define a qualified residential mortgage … as a mortgage of a certain quality so as to avoid the need for retained risk," said Bernanke, testifying before the House Financial Services Committee.
On Tuesday, regulators brokered a deal between the banking agencies to establish national mortgage servicing standards by allowing some new rules to be part of a related risk-retention proposal called for by the Dodd-Frank Act.
The Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency (OCC) have differed on whether servicing standards should be part of risk retention, with the OCC arguing that regulators in fact don't have the legal authority to do so. The Fed intervened to help close a deal.
"I think servicing is part of the mortgage contract," Bernanke said.