June , 2011

Department of the Treasury

Office of the Comptroller of the Currency

12 CFR Part 43

Docket No. OCC-2011-0002

Federal Reserve System

12 CFR Part 244

Docket No. 2011–1411

Federal Deposit Insurance Corporation

12 CFR 373

Federal Housing Finance Agency

12 CFR 1234

Securities and Exchange Commission

17 CFR Part 246

Release No. 34-64148; File No. S7–14-11

Department of Housing and Urban Development

24 CFR Part 267

Re: Proposed Rule on Credit Risk Retention

Dear Sir/Madam:

The undersigned organizations of local elected officials and affordable housing and community development practitioners appreciate the opportunity to provide comments on the proposed rule regarding “Credit Risk Retention,” and more specifically, an exemption for asset-backed securities that are collateralized exclusively by residential mortgages that qualify as “qualified residential mortgages,” as defined therein.

As you may know city and county governments have long engaged in providing assistance for home buyers, often first-time homebuyers, using a variety of programs including tax-exempt Mortgage Revenue Bonds and/or downpayment assistance programs for income-restricted homebuyers. The latter are typically funded through such federal block grant programs as Community Development Block Grants (CDBG), HOME Investment Partnership Grants (HOME) or through premium bonds where downpayment assistance is included in the structure of the bonds. These loans have performed very well over the course of their existence.

We support the proposed rule’s treatment of the guarantee provided by a Government-Sponsored Enterprise, Fannie Mae and Freddie, while operating under the conservatorship or receivership of the Federal Housing Finance Agency with capital support from the U.S. Treasury will satisfy the risk retention requirements of each Enterprise under 15G of the Securities an d Exchange Act of 1934 as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. We further support the proposed rule’s exemption for any securitization transaction that is insured or guaranteed and collateralized solely by a residential or multifamily loan through such federal programs as the Federal Housing Administration, the Veteran’s Administration and the Department of Agriculture’s Rural Development guarantee program. Each of these agencies sets appropriate underwriting and servicing standards, and in the case of some multifamily programs underwrites the mortgage itself.

We are concerned about, and do not support, the proposed rule’s restrictions on what constitutes a “qualified residential mortgage (QRM),” which, if left unchanged, will have a serious adverse impact on first-time homebuyers, minorities and low-and-moderate income households. The requirements for a minimum downpayment of 20% and maximum front-end and back-end debt-to-income ratios of 28 percent and 36 percent respectively and loan-to-value ratios of 80 percent are overly burdensome. According to data compiled by the Federal Housing Finance Agency, without the loan-to-value and debt-to-income restrictions, as proposed in the rule’s requirements, there would be in a large increase (up to 17 percent increase in loans that would qualify in the former) and (up to 24 percent in the latter) in the number of loans that would qualify with a relatively small increase in delinquencies. Thus, these restrictions should be dropped

We further support more reasonable underwriting standards for QRMs, including a 3.5 percent downpayment requirement (the same as FHA)?? or 5 percent (so the loans can be purchased by the Enterprises)?? , with the ability for that requirement to be met through a second mortgage program administered by a local government or non-profit agency or through a premium bond structure. The rule should permit downpayment assistance in the form of a grant or loan which may be deferred and do on sale or forgiven over the life of the loan. In addition, the mortgage must include private mortgage insurance and a borrower contribution of no more than 1 percent of the purchase price to signify “skin in the game.”

According to the Center for Responsible Lending, “[B] based on 2009 income and home price data, it would take … fully 14 years to save for 20 percent downpayment based on the National Association of Realtor’s 2009 median home price of $172,100.” This surely would deny first-time homebuyers and others of low-and-moderate income who are otherwise credit worthy the opportunity to purchase a home when they are ready. Surely this is not the type of outcome that the proposed rule should foster.

We do support the proposed rule’s prohibiting QRMs from having predatory product features that contributed to high foreclosures and delinquencies such as negative amortization, interest-only payments or significant interest rate increases.

Thank you for your favorable consideration of our recommendations.