QM Fails to Deter Bank from Offering IO Loans


Bank of the West will keep originating and holding in portfolio the interest-only loans that the Consumer Financial Protection Bureaus new rules assign more liability to starting Friday.

“We extensively reviewed the CFPB’s rules and found them broadly consistent with how Bank of the West has always done business. At the same time, we know that interest-only loans can fulfill the mortgage needs of many of our customers,” says Paul Wible, senior EVP and head of the bank’s national finance group.

Wible adds, “Our analysis confirmed what we believed when the new rules were announced: a well-underwritten, interest-only mortgage can be a good choice for our customers and they are safe for us to hold on our balance sheet.”

The bank has held IO loans in portfolio for many years, and says it has reviewed its underwriting requirements to ensure that borrowers who get them have the ability to repay them once the IO period has expired.

“Interest-only loans meet the needs of certain customers, such as the self-employed, or those interested in cash flow,” says Karen Mayfield, national sales manager for Bank of the West’s mortgage banking division.

IO loans fall outside the qualified mortgage parameters for loans protected from new legal liabilities.

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