Lawmakers Raise Concerns on PCCRA and QRM
On June 19, 2012, twelve members of Congress, led by Sens. Hagan (D-NC) and Crapo (R-ID), issued a letter expressing concern to six banking agencies regarding their proposed risk retention regulations.
One of the proposed rules would require securitizers to set aside the profits from sales of securities in a “premium capture cash reserve account” (PCCRA). Specifically, the lawmakers raised concerns that this provision would greatly reduce the securitization market for many asset classes, thereby reducing a vital source of capital for the commercial real estate industry.
The letter also voiced disappointment over the agencies’ rigid Qualified Residential Mortgage (QRM) proposal, which would require lenders that securitize mortgage loans to retain five percent credit risk in the security if the mortgages have less than an eighty percent loan-to-value ratio. In most instances, this would require a twenty percent down payment from the borrowers. These restrictions would increase consumer costs and reduce access to affordable credit.
Given the potential negative economic consequences on commercial and residential real estate credit markets, lawmakers urged the banking agencies to reconsider the PCCRA and QRM proposals.