WASHINGTON, D.C. — Last week, the American Financial
Services Association submitted a letter to six federal agencies on their
proposed rule regarding credit risk retention.

AFSA's letter focused on the impact of the proposed rule on
the vehicle finance industry.

The association encouraged the agencies — which included the
Office of the Comptroller of the Currency, the Federal Reserve, the Securities
and Exchange Commission, the Department of Housing and Urban Development, the
Federal Housing Finance Agency and the Federal Deposit Insurance Corp. — to
substantially revise the Qualifying Automobile Loan (QAL) standard.

AFSA contends the focus on the QAL underwriting standards
and loan characteristics are more appropriate for mortgage loans than
automobile loans.

Calling the proposed QAL standard extremely narrow and
unduly harsh, AFSA suggested an alternative approach.

AFSA's letter authored by executive vice president Bill
Himpler indicated that the exclusion of motorcycles from the QAL should be
removed. The association also asked for additional clarification for equipment
and machinery finance.

"The consequences that would likely result if changes are
not made to the latest iteration of the QAL portion of the Qualifying Residential
Mortgage rule are that fewer vehicle finance companies would use
securitizations," Himpler wrote.

"The main reason is that the unusual, housing-centric
underwriting criteria would force vehicle finance companies either to retain
the full 5 percent mandated by regulation (at significant expense) or to
completely overhaul the way they underwrite an auto loan, again something that
would result in significant costs," he continued.

"In turn, vehicle finance companies' ability to compete with
banks would be compromised leaving consumers with fewer options and higher costs.
This would be felt by vehicle dealers as well. And, taken to the next logical
step, fewer vehicles will be sold, harming economic growth and job-creation,"
Himpler went on to state.

"For those reasons, AFSA respectfully requests that the agencies
re-align the latest QAL proposal to move away from a housing-focused set of
underwriting criteria to one that better fits the current, well-established
conventions of auto loan underwriting," he added.

Himpler's entire letter can be downloaded here.

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