The Qualified Residential Mortgage Rule


One of the most controversial, far-reaching, and profound mortgage-related provisions of the Dodd-Frank Act is the "skin in the game" requirements of sections 941. Under these provisions, securitizers of asset-backed securities (ABS) must retain at least 5% of the credit risk unless the mortgage conforms to the starkly conservative "qualified residential mortgage" (QRM) standards. According to Congress, when securitizers retain a material amount of risk, they have "skin in the game," aligning their economic interests with those of investors in ABS.

The Federal Reserve Board, along with other federal regulators, published the proposed QRM rule on March 29, 2011, seeking input on 174 individual QRM-related questions. On June 6, the Board announced that the comment period had been extended to August 1, 2011.

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Published In: Finance & Banking Updates, Residential Real Estate Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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