The Securities Industry and Financial Markets Association (SIFMA) reacted to the House Financial Services Committee hearing titled Understanding the Implications and Consequences of the Proposed Rule on Risk Retention.

Ken Bentsen, executive vice president in public policy and advocacy from SIFMA, stated:

“SIFMA appreciates the House Financial Services Committee’s focus on understanding the implications and consequences of the proposed rule on risk retention.  Today's hearing is critically important to assess the proper implementation of risk retention requirements in the securitization markets.  Securitization is a vitally important component of our financial markets that impacts credit availability for businesses large and small and every American family. 

“The current rule proposals by federal regulators are sweeping and, if implemented in their current form, could have profound and negative effects on credit availability.  Properly calibrated risk retention requirements can help align the incentives of securitization market participants. While several of the provisions in the proposal attempt to strike the right balance, a number of provisions are unworkable, will hamper market functions and impede consumer access to credit.

“Provisions which may negatively impact the incentives of financial institutions to securitize assets would upend longstanding market practices, and may render some transactions which have provided important funding to lending markets impossible.  Of particular concern are the premium recapture provisions, especially their impact on the MBS and CMBS markets.  These provisions may materially impact the economics of transactions for the issuer by effectively requiring retention beyond what was understood by the market to be required by Dodd-Frank, and beyond what is economical for securitization sponsors.

“Congress is right to examine the rulemaking process in this area as it affects every Member’s constituents.  We will continue to work with Congress and regulators as these new rules are finalized, and urge regulators and policymakers to view these rules in the context of other efforts currently underway to ensure the cumulative impacts, costs, and benefits of the multitude of current regulatory exercises are considered.”

Meanwhile, the Mortgage Bankers Association (MBA), along with a group of financial and housing trade organizations, released the following statement before today's House Subcommittee on Capital Markets and GSEs hearing on the Qualified Residential Mortgage (QRM):

"In the midst of a very fragile housing recovery, the government is throwing a devastating, unnecessary and very expensive wrench into the American dream. First time homebuyers will have to choose between higher rates today or a 9-14 year delay while they save up the necessary down payment. And 25 million current homeowners would be locked out of lower refinancing rates because they lack the required 25 percent equity in their homes." 

"High down payment and equity requirements will not have a meaningful impact on default rates. But they will require millions of consumers, who are at low risk of default, to either put off buying a home or pay unnecessarily high rates. The government is penalizing responsible consumers, making homeownership more expensive or simply out of reach for millions. We urge regulators to develop a final rule that encourages good lending and borrowing without punishing credit-worthy consumers."

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