Modified Loans would Retain Risk Weight under Rule

The Federal Reserve and key financial regulators today adopted an interim final rule on loans modified under the Treasury Department‘s Making Home Affordable Program (MHAP). The Treasury in early March unveiled guidelines under the program to “promote sustainable loan modifications,” according to the Federal Reserve’s statement. The rule, which is open to public comment up to 30 days after its publication in the Federal Register, provides that mortgages made under the program must keep the risk weight assigned to the loan prior to the modification. “The interim final rule would provide a common interagency capital treatment for mortgage loans modified under MHAP,” the Fed says in the statement today. “For example,” the Fed adds, “mortgage loans risk weighted at 50% prior to modification would continue to be risk weighted at 50% after modification provided they continue to meet other applicable criteria.” Publication of the interim final rule within the Federal Register is expected soon. Write to Diana Golobay.