Credit Risk Retention: The New Proposal and its Implications for Securitization Markets

On August 28, 2013, the federal banking and housing regulatory agencies jointly re-proposed rules (the “Revised Proposal”) to implement Congress’s mandate in Section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd Frank”) that sponsors of asset-backed securitizations retain a portion of the risk of assets that they securitize. Our alert memorandum (link below) summarizes the main features of the Revised Proposal’s general risk retention requirements, analyzes the revised definition of Qualified Residential Mortgage and its potential impact, and discusses the key implications of the proposal for market participants in the residential and commercial mortgage and collateralized loan obligation securitization markets. Our analysis of the Revised Proposal also highlights specific issues and questions market participants may consider for comment. The deadline for comment on the Revised Proposal is October 30, 2013.