US and European Union Move Forward on Legislation Concerning Mortgage Credit

Date Published 9/15/2011
Author Marja Hoek-Smit
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This summer, both the USA and the European Union took important steps towards drafting directives and regulations to strengthen the credit agreements relating to residential property.In July 2011, The Committee on Economic and Monetary Affairs of the European Parliament proposed detailed amendments to a draft Commission proposal for a directive on credit agreements relating to residential immovable property <Proposal> . During the same month, the responsible agencies of the United States Government and Federal Reserve System issued proposals for the implementation of Credit Risk Retention requirements on asset-backed securities as added by section 941(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act <Credit Risk Retention> and codified as a new section 15G of the Securities and Exchange Act of 1934. An issue particularly hotly debated by the mortgage industry is that of the exemption of risk retention for those mortgages that qualify as “qualified residential mortgages” or QRM defined by the Agencies. For a summary of QRM requirements see <Summary>. The US government’s broader reform proposals for the housing finance market are formulated in Treasury/HUD report of February 2011<Report to Congress>. See news item 2/14/2011. These efforts follow on the guidelines set forth in a report by the Basel-based Financial Stability Board on underwriting standards related to residential immovable property.  <FSB Mortgage Guidelines>



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