Reuters is reporting that federal regulators are considering revamping some of their rules related to the retained risk provisions of the Dodd-Frank Act. The law requires that lenders writing mortgage loans that do not meet the definition of qualified a residential mortgage (QRM) must retain a minimum of 5 percent ownership of those loans when they are sold on the secondary market. This "skin-in-the-game" requirement has been extremely unpopular with both lenders and consumer groups. While several proposed rules defining QRM have been submitted for public comment, the final rule has not yet been issued by the regulators changed with writing it.

According to Reuters these agencies, the Federal Reserve, Federal Deposit Insurance Corporation, Office of Comptroller of the Currency, Securities and Exchange Commission, Federal Housing Finance Agency and the Department of Housing and Urban Development, will soon release for comment a new QRM proposal that will be seen as "softening rules to prevent the type of shoddy underwriting practices that fueled the housing bubble."

The changes will reflect nervousness on the part of regulators about damaging the housing recovery and reflect lobbying from both lenders and consumer groups who maintain the earlier proposals were too harsh and could prevent first-time home buyers and lower income borrowers from obtaining mortgages.

Members of Congress have also weighed in, maintaining that the portion of the QRM raising downpayment levels to 20 percent fly in the face of Congressional intent. The Wall Street Journal has reported that one proposal would raise the minimum downpayment to 30 percent and the Reuters story seems to imply that this would be an attempt on the part of regulators to force banks to make non-QRM loans or stop lending.

Reuters quotes David Stevens, president and chief executive officer of the Mortgage Bankers Association as stating, "The QRM rule as it was originally proposed would have hampered private capital from coming back into the mortgage market and would have raised costs for the middle class and first time home buyers."

None of the regulatory agencies would comment about the rumored changes, Reuters said. The rule-making process is expected to be finalized by the end of the year