No fair lending risks posed by QM, regulators claim

by MPA23 Oct 2013

Federal regulators said Tuesday that they didn’t foresee that creditors who offered only “qualified mortgages” would risk violating any fair lending practices.

The Consumer Financial Protection Bureau plans to implement new mortgage regulations in January – chief among them the “ability to repay” rule, which requires lenders to verify that borrowers can afford their loans. Many lenders plan to minimize their liability by offering only low-risk “qualified mortgages.”

However, some worry that making only qualified mortgage loans could exclude some minority groups, and industry leaders asked federal regulators to clarify any fair lending risks they might face.

In a joint statement by the CFPB, FDIC, Federal Reserve, Office of the Comptroller of the Currency, and the National Credit Union Administration, regulators said Tuesday the risk was minimal.

“The agencies do not anticipate that a creditor’s decision to offer only Qualified Mortgages would, absent other factors, elevate a supervised institution’s fair lending risk,” the statement read.”…With respect to any fair lending risk, the situation here is not substantially different from what creditors have historically faced in developing product offerings or responding to regulatory or market changes. The decisions creditors will make about their product offerings in response to the Ability-to-Repay Rule are similar to the decisions that creditors have made in the past with regard to other significant regulatory changes affecting particular types of loans.”

The regulators said lenders had been able to avoid violating fair-lending rules during the implementation of past regulations, and should be able to continue to do so under the new CFPB regulations.

“Creditors should continue to evaluate fair lending risk as they would for other types of product selections, including by carefully monitoring their policies and practices and implementing effective compliance management systems,” the agencies stated. “As with any other compliance matter, individual cases will be evaluated on their own merits.”


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