The qualified mortgage test and risk retention rules will cement Fannie Mae and Freddie Mac’s dominance in the secondary market, keeping the private-label business confined mainly to jumbo loans, according to a new report from FBR Capital Markets.FBR predicts that the QM language — mandated under the Dodd-Frank Act — will lead to further standardization of mortgages and prevent “new entrants from eroding underwriting standards in an attempt to increase market share.”

As proposed, the risk retention rule (which has yet to be finalized) will lead investors to prefer loans securitized by Fannie and Freddie because the two are exempt from risk retention under Dodd-Frank.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.