Borrowers would have to put 20% down on a mortgage in order for the lender to be exempt from the “skin in the game,” rules, according to a proposed rule sent out for comment today by the FDIC and other regulators.
Under the rule, companies packaging loans into securities would have to hold at least 5% of the risk unless the loans were considered high quality.
Residential mortgage loans with a 20% down payment or those that have been guaranteed by Fannie Mae or Freddie Mac would be exempt from the 5% requirement. The proposal also requests comment on a proposal to allow for a 10% down payment and mortgage insurance. However, some GOP lawmakers have introduced legislation that would require Fannie and Freddie mortgages not to be exempt.
The FDIC voted to send the regulations out for a 60-day comment period. And four other regulatory agencies are likely to do so very soon.
The requirements are mandated by the financial overhaul bill that Congress passed last year. Lawmakers did not require the NCUA to issue rules in this area. Credit unions would have to conform to the rules if they want to enter the secondary market.