Regulators reassure lenders on QM rules

by Ryan Smith16 Dec 2013
Federal regulators on Friday tried to reassure lenders that as long as they issue sound mortgages, they shouldn’t worry about regulatory action.

In a joint statement, the Federal Reserve, the FDIC, the Office of the Comptroller of the Currency and the National Credit Union Administration said lenders shouldn’t worry about issuing loans that don’t meet the “qualified mortgage” standard taking effect in January.

“From a safety-and-soundness perspective, the agencies emphasize that an institution may originate both Qualified Mortgage and non-Qualified Mortgage loans, based on its business strategy and risk appetite,” the regulators said. “The agencies will not subject a residential mortgage loan to safety-and-soundness criticism solely because of the loan’s status as a Qualified Mortgage or non-Qualified Mortgage loan.

“The agencies continue to expect institutions to underwrite residential mortgage loans in a prudent fashion and address key risk areas in residential mortgage lending, including loan terms, borrower qualification standards, loan-to-value limits, documentation requirements, and portfolio- and risk-management practices, regardless of whether a residential mortgage loan is a Qualified Mortgage or non-Qualified Mortgage,” they added.

The regulators also said they didn’t foresee any lenders running afoul of the Community Reinvestment Act should they decide to issue only qualified mortgages.

“(The Consumer Financial Protection Bureau’s) Ability-to-Repay Rule and CRA are compatible,” the regulators said. “Accordingly, the agencies that conduct CRA evaluations do not anticipate that institutions’ decision to originate only QMs, absent other factors, would adversely affect their CRA evaluations.”


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