The federal banking agencies issued a joint notice on August 28 that revised a proposed rule that would require sponsors of securitization transactions to retain risk in those transactions. The new proposal revises a proposed rule the agencies issued in 2011 to implement the risk retention requirements in the Dodd-Frank Act. The proposed rule would provide asset-backed securities (“ABS”) sponsors with several options to satisfy the risk retention requirements. Comments on the proposed rule are due by October 30.

Nutter Notes: As required by the Dodd-Frank Act, the proposal would define a “qualified residential mortgage” (“QRM”) and exempt securitizations of QRMs from the risk retention requirements. In addition, the original proposal generally measured compliance with the ABS risk retention requirements based on the par value of securities issued in a securitization transaction and included a so-called premium capture provision. The new proposal would provide that risk retention generally be based on fair value measurements without a premium capture provision.