The Dodd-Frank Act requires the issuance of regulations providing that securitizers retain an economic interest in a  portion of the credit risk for any asset that securitizers transfer , sell, or convey to a third party, referred to as the risk retention  requirements. The Dodd-Frank Act also contains an exemption from these risk retention requirements for mortgages that meet  the definition of a “qualified residential mortgage” (“QRM”).  The Dodd-Frank Act requires the Federal Reserve, Of fice of the  Comptroller of the Currency , Federal Deposit Insurance Corporation (“FDIC”), SEC, HUD, and FHF A to jointly define the  term “QRM,” taking into consideration underwriting product features that historical loan performance data indicate result in a  lower risk of default, such as “mortgage guarantee insurance or other types of insurance or credit enhancement obtained at the  time of origination, to the extent such insurance or credit enhancement reduces the risk of default.” In March 201 1, federal  regulators issued the proposed risk retention rule that includes a definition of QRM.  Among other requirements, the proposed  rule would exclude loans with non-traditional features, such as negative amortization, and would require adherence to strict,  objective underwriting standards, including maximum debt-to-income ratios and borrower credit history restrictions. Most  notably, the proposed rule required a maximum L TV of 80% on a home purchase transaction, regardless of whether the loan  was insured by private mortgage insurance.  The proposed rule was subject to a public comment period that ended  August 1,  2011. The regulators sought comments on virtually all aspects of the QRM definition, including: (1) a request for historical loan  data that the regulators may use to assess whether loans with mortgage insurance are less likely to default than loans without  mortgage insurance; (2) if the QRM definition included mortgage insurance, what financial eligibility standards should be  incorporated for mortgage insurance providers and how might those standards be monitored and enforced; and (3) the potential  benefits and costs of the alternative QRM definition that would give credit to mortgage insurance.  There was also a specific  request for comment on an alternative QRM definition that, if approved by regulators, would take mortgage insurance into  account in determining whether the borrower met a 90% L TV requirement.  We believe that loans that meet the definition of a QRM are likely to be favored in the market place because of their  exemption from these risk retention requirements.  While regulators are granted the discretion to determine whether loans with  private mortgage insurance are QRMs that are exempted from the Dodd-Frank  Act’s risk retention requirements, the Dodd- Frank Act provides that loans with FHA, VA or U.S. Department of Agriculture (“USDA”) insurance will automatically be  exempted, which could disadvantage private mortgage insurers if private mortgage insurance is not included in the QRM  definition on an equivalent basis. Currently , under the proposed rule, loans purchased and securitized by the GSEs while they  are in conservatorship would be exempt from the risk retention requirements. Regulators have not yet issued a final rule and it  is not known when final QRM regulations will become ef fective or what the ultimate requirements may be. Some legislators  and policymakers have expressed support for a QRM definition that is equivalent to the Qualified Mortgage final rule, which  was released in January 2013, as further discussed below . The Dodd-Frank Act also authorizes the CFPB to issue regulations prohibiting a creditor from making a residential  mortgage loan unless the creditor makes a reasonable and good faith determination based on verified and documented  information that, at the time the loan is consummated, the consumer has a reasonable ability to repay the loan according to its  terms, as well as applicable taxes, insurance (including mortgage guaranty insurance) and assessments.  The Dodd-Frank Act  provides that a creditor may presume that a borrower will be able to repay a loan (i.e., has satisfied the “ability to repay”  analysis above) if the loan has certain low-risk characteristics that meet the definition of a “qualified mortgage” (“QM”).  A QM  means, among other things, any residential mortgage loan: (i) the regular period payments for which do not result in an increase  of the principal balance or allow the consumer to defer payment of principal; and (ii) for which the total points and fees payable  in connection with the loan do not exceed 3% of the total loan amount. In January 2013, the CFPB published the final  Ability-to-Repay and Qualified Mortgage Standards under the  Truth in  Lending Act final rule (the “QM final rule”). Under the QM final rule, the general QM definition contains a 43% debt-to- income ratio limitation. However, the CFPB acknowledged that it may take time for the non-QM market to establish, and  therefore, the QM final rule includes a temporary alternative definition of QM that includes loans for borrowers with debt-to- income ratios above 43% as long the loan meets the following conditions: (1) it is eligible to be purchased, guaranteed, or  insured by the GSEs, FHA, VA, USDA or Rural Housing Service (“RHS”); and (2) it satisfies the QM final rule’ s requirements  with regard to avoiding risky loan features (e.g., negative amortization and interest only features) and the limitation on points  and fees discussed below. This means that loans insured by private mortgage insurance will qualify as QM loans as long as this  temporary alternative definition is in ef fect and the loans meet the specified conditions. In the case of the FHA,  VA, USDA or  RHS, the temporary definition of QM will expire at the earlier of seven years or when those government entities adopt their  own QM rule. The temporary alternative definition of QM for loans eligible to be purchased by the GSEs will expire at the  earlier of seven years or at such time as the GSEs are no longer under conservatorship or receivership. 54