Proposed risk retention rules for asset-backed securitizations 

October 16: Federal regulators recently re-proposed risk retention rules for asset-backed securitizations (ABS) that would require a sponsor of financial assets to retain a minimum of 5% of the credit risk unless certain exceptions are met.

The comment period ends October 30, 2013.

In 2011, federal regulators proposed an initial risk retention rule. To address constituents’ concerns, the definition of qualified residential mortgage (QRM), the measurement of credit risk retention, the risk retention options, and the expiration periods on risk transfer restrictions were proposed to be modified.

Changes made to the original proposal concern these topics:

  • Qualified residential mortgage (QRM)
  • Premium capture cash reserve account
  • Risk retention options
  • Hedging, financing, and transfers of retained interests

Read an October 2013 report [PDF 229 KB ] prepared by KPMG LLP: Defining Issues: Regulators Revise Proposed Risk Retention Rules for Asset-Backed Securitizations

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