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Federal Regulators Provide Guidance on New Mortgage Rules

mortgage applicationIn a joint statement issued on October 22, federal regulators said they do not expect that a lender's decision to offer only qualified mortgages would expose the lender to fair lending risk.

The Consumer Financial Protection Bureau's Ability-to-Repay and Qualified Mortgage Rule takes effect in January 2014. The Ability-to-Repay Rule requires mortgage lenders to determine a consumer's ability to repay the loan before extending credit. Lenders that offer qualified mortgages are presumed to have complied with these requirements. In addition to meeting certain underwriting standards, qualified mortgages are generally without the risky features that contributed to the mortgage crisis.

Clarity sought on rule
Lenders have requested clarification on whether offering only qualified mortgages would leave creditors open to challenges under the disparate impact doctrine of the Equal Credit Opportunity Act. The law prohibits creditors from making lending decisions on the basis of such characteristics as race, religion, marital status, color, national origin, sex, and age.

The regulators recognized that some lenders will offer only qualified mortgages—at least for a time—once the new rules take effect. Further, they noted that lenders have historically made changes to their product offering in response to regulatory and market changes without fair lending challenges. "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," the agencies said.

Ongoing evaluation advised
Regulators advised creditors to "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 five federal agencies issuing the statement were the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency.

October 29, 2013


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