Nearly 40 senators have now signed onto a measure urging federal regulators to modify a risk retention proposal and adopt changes that would pave the way for a broad exemption for securitized mortgages that have a low risk of default.

The letter, drafted by Senators Mary Landrieu, D-La., Kay Hagen, D- N.C., and Johnny Isakson, R-Ga., has 35 Senate co-signers calling for a rewrite of the proposal that requires securitizers to retain 5% of the credit risk on loans.

The three senators sponsored a "qualified residential mortgage" amendment that would exempt certain safely underwritten loans from risk retention.

In April, the regulators proposed a QRM definition that requires a 20% downpayment on mortgages that are exempted from risk retention, which critics claim is too restrictive. 

"We intended to create a broad exemption from the risk retention for historically safe mortgage products," Senators Landrieu, Hagen and Isakson said in a letter to the heads of six regulatory agencies working on the risk retention rule.

The three senators claim the "unnecessarily tight downpayment restrictions" go beyond the intent of their amendment that was attached to the risk retention provisions of the Dodd-Frank Act that Congress past last summer.

"Congress intended the QRM to exempt safe, well underwritten mortgages that stood the test of time for the risk retention requirement.  We urge you to follow our intent as you modify the proposed risk retention rule," the May 26 letter said.

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