A 90-day public comment period ends Thursday for a proposal to revise parts of the existing Basel III framework that would, among other things, eliminate the threshold-based deduction for mortgage servicing assets across all banking organizations.

The proposal, jointly put forth on March 19 by the Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp., would reduce the amount of capital reserves required to be held by large banks.

As of 4 p.m. EDT on Thursday, the proposed rule had received 147 comments, mostly with feedback from trade groups, organizations and private citizens with suggestions for specific changes.

Developed after the 2008 financial crisis, the Basel III framework was established to set global standards for bank capital requirements and other liquidity considerations.

Mortgage Bankers Association President and CEO Bob Broeksmit, who in April had testified before the House Financial Services Committee on the banking framework, submitted a 32-page letter. It included numerous charts and graphs and 10 pages of suggested text changes.

Four Democratic senators — Elizabeth Warren of Massachusetts, Jack Reed of Rhode Island, Chris Van Hollen of Maryland and Tina Smith of Minnesota — sent a letter requesting a 180-day extension of the comment period. They are all on the Senate Committee on Banking, Housing, and Urban Affairs, of which Warren is the ranking member.

“The agencies have not afforded the public sufficient time to evaluate all three proposals, which are complex, span more than 1,500 pages, impact every bank in the country, and could increase the likelihood of big bank failures and taxpayer bailouts at a moment of significant economic uncertainty,” the senators wrote.

They added: “Failing to grant an extension would establish a troubling double standard, giving the public less time to comment on rulemakings that the banking industry supports and more time to comment on rulemakings that the industry opposes.”

The Community Home Lenders of America (CHLA), a nonprofit comprised of small and midsized community-based mortgage lenders, argues that while the proposal lowers bank risk weights for whole residential mortgage loans and mortgage servicing rights, it fails to address what the CHLA views as excessive 100% risk weights on warehouse loans to mortgage lenders. It requests a reduction to 50%.

The CHLA says it is “skeptical that these risk weight reductions will have any significant impact in bringing banks back into the business of originating mortgage loans to be held in portfolio or to originate [Federal Housing Administration] and other federal agency loans.” It believes other factors “play a more significant role in the banks’ broad retreat from the mortgage business over the last 15 years.”

U.S. representatives Andy Barr, R-Ky., and Jim Himes, D-Conn., requested recognition of regulated insurance companies as eligible guarantors under the rule, “consistent with the treatment of other prudentially regulated financial companies, such as depository institutions.”

“We also ask that your agencies update relevant supervisory guidance to clarify expectations, ensure interagency consistency, and provide transparency around the application of rules regarding credit risk transfer more broadly, and utilizing insurance and reinsurance companies as protection,” the U.S. House members wrote. They observed that Michelle Bowman, vice chair for supervision at the Fed, had “emphasized the importance of supervisory guidance in clarifying permissible activities and tailoring expectations for smaller institutions” in 2023.

Another letter came from the National Council of State Housing Agencies (NCSHA). It advocated for two additional changes to the Basel standards to “increase liquidity for our nation’s two most important affordable housing financing tools,“ referring to the Low-Income Housing Tax Credit and tax-exempt private activity bonds.

The NCSHA asked that risk weighting for housing credit-financed properties be reduced from 100% to 20%, and that “the disparity in risk weights between general obligation municipal bonds and municipal revenue obligation bonds” be reduced.

It also said that while it appreciates the proposal’s adoption of more flexible right weights for single-family mortgage loans, “the proposal would base the risk weights entirely on a mortgage’s loan-to-value ratio and establish burdensome risk weights on high LTV mortgages.” This would lead to less mortgage lending to low- and moderate-income households and other underserved populations, NCSHA maintained.

Brandon Milhorn, president and CEO of the Conference of State Bank Supervisors, submitted a nine-page letter on Thursday, saying that while the proposals “make progress towards enhancing the sensitivity of regulatory capital requirements,” the agencies should further enhance risk sensitivity and consistency, “particularly for smaller banks not subject to the proposed expanded risk-based approach.”

Milhorn concluded: “State supervisors encourage the agencies to adopt our proposed recommendations to further enhance the sensitivity and consistency of the proposed capital framework and to ensure that banks of all sizes operate on a level playing field.”