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Risk-Retention Rules Could Lead To Two-Tier Market

The 5% risk-retention rules proposed by Federal Deposit Insurance Corp. and the Federal Reserve could result in a two-tiered market, according to Moody’s Investors Service, iMarketnews.

The 5% risk-retention rules proposed by Federal Deposit Insurance Corp. and the Federal Reserve could result in a two-tiered market, according to Moody’s Investors Service. Though generally a positive for U.S. banks, says Moody’s, the proposal would lead to a division in the market between those loans that meet the standards and thus designated qualified residential mortgages, and those that do not because of higher capital requirements. Those borrowers who do not meet the higher standards could face lenders reluctant to issue them loans, or could be charged a significant premium on the interest rate.

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