Risk Retention

Risk retention is the retention of a portion of the credit risk of securitized assets by the originator of such assets or by the issuer or sponsor of the securitization. In the wake of the financial crisis, legislators or regulators in various jurisdictions, including the United States and the EU, adopted rules requiring securitizers to retain credit risk in securitizations. In the United States, Title IX of the DFA requires a securitizer to retain 5% of the credit risk of the underlying financial assets, subject to certain exceptions. In late 2014, US regulators, including the FDIC, the OCC, the FRB, the SEC, the FHFA and HUD, jointly adopted a final rule implementing the DFA risk retention requirements.