Risk-retention rules were designed to encourage more responsible underwriting and to better align the interests of securitization sponsors and investors.

However, the rules originally proposed a year and a half ago provide sponsors of residential mortgage-backed securities (RMBS) with more than one way to meet this requirement. The regulators’ goal, if the final rule echoes the proposal, is to let investors decide, by putting their money to work, with which version they are more comfortable. Currently, however, investors differ on which option is best.

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