When it rains, it pours, but we're looking at a hail storm in housing finance this week, as government starts the business of taking itself out of the housing business. Tomorrow morning the FDIC will release and vote on proposed risk retention rules for the mortgage market. This includes the "Qualified Residential Mortgage" definition. A QRM would be exempt from risk retention, where the banks have to hold on to 5 percent of the risk when securitizing loans.
The QRM will likely require a 20 percent down payment on the loan, as well as other underwriting criteria, and loans sold to Fannie and Freddie (while still in conservatorship), as well as FHA loans, would be exempt. At the same time, Fannie, Freddie and the FHA are making themselves more expensive, as they try to shrink their currently overwhelming market share.