The latest impediment to non-agency securitization stemming from the Dodd-Frank Act (DFA) is the proposal to create "premium capture cash reserve accounts" (PCCRAs). This provision, contained in the recent interagency document that proposed how the "risk retention" provisions of the DFA would be defined and implemented, would require the creation of a cash account to prevent structurers from attempting to monetize what they define as "excess spread." In my view, this proposal could be highly damaging to consumer mortgage lending and is premised on a flawed understanding of securitization practices. It also represents another in a series of impediments to the revival of the market for non-agency securitizations.
After outlining a narrow definition of "qualified residential mortgages" (QRMs) that are exempt from the 5% risk retention requirements, the release then describes a potential loophole: