Federal agencies revise proposed rule on risk retention, removing controversial provisions

Six federal financial regulatory agencies (the OCC, the Federal Reserve Board, the FDIC, the FHFA, the SEC and the HUD) have issued a notice revising their previous 20 April 2011 proposed rule on risk retention in securitisation transactions.

The new proposed rule, issued on 28 August 2013, was jointly issued by the agencies, with the secretary of the Treasury as chairperson of the Financial Stability Oversight Council playing a co-ordinating role.

The proposed rule removes certain controversial provisions that were included in the previous rule. For example, the proposed rule removes the Premium Capture Cash Reserve Account concept, which required securitisers to retain funds in a separate account to cover certain losses on underlying loans. Also, securities issued where all underlying loans meet the definition of a Qualified Residential Mortgage (QRM) are exempt from risk retention requirements…

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