Under the proposal offered by five regulators in March, financial firms would need to retain 5 percent of the risk on asset-backed securities, unless they were made from “qualified residential mortgages,” (QRM) which the regulators defined as either having a 20 percent down payment or government backing.

When finalized, the rules will implement a key provision of the Dodd-Frank financial reform law. The provision requires securitizers to keep some “skin in the game” when creating and selling securities, part of an attempt to prevent the widespread creation of risky securities sold to other investors that plagued the market during the recent financial crisis.

But a group of 39 senators wrote to the regulators in May to tell them that they missed the mark in their proposal, contending their QRM definition “goes beyond the intent and language of the statute by imposing unnecessarily tight down payment restrictions.”

As a result, credit-worthy borrowers could struggle to obtain an affordable mortgage, as higher interest rates would be needed to offset the added risk for the mortgage originator, they argued.

They called on the regulators to rework their proposed rules.

The delay comes as regulators are scrambling to meet deadlines set by Dodd-Frank. Under the financial overhaul, most of the implementation work is scheduled to be completed in July.


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