In the post-meltdown era of hyper-regulation, lenders are understandably
not eager to stick their necks out any further than necessary. Many in the mortgage industry would prefer to avoid the risks associated with originating loans that don’t qualify as “Qualified Mortgages” (QM), but have expressed concern
as to whether Regulation B’s disparate impact doctrine (part of the Equal Credit
Opportunity Act or “ECOA”) allows them to stick to offering the safest loans.
The ECOA makes it illegal for a creditor to
discriminate in any aspect of a credit transaction based on characteristics
including race, religion, marital status, color, national origin, sex, and age.
QM regulations require lenders to make a
good faith determination as to whether a consumer has the ability to repay a
mortgage loan before extending credit to the consumer. Lenders are presumed to have complied with
the ability to repay requirement if they issue QMs.
In other words, lenders don’t want to originate the non-QM loans that pose more risk to their balance sheets, but neither do they want to violate fair lending policies if such a choice is construed as discriminating against borrowers who don’t fit the QM mold. Federal regulators today clarified today responded to these concerns, essentially granting lenders permission to only offer QM loans.
The five regulatory agencies issuing
today’s statement say they do not anticipate that a creditor’s decision to
offer only qualified mortgages would, absent other factors, elevate a creditor’s
fair lending risk. The decisions creditors make about product offerings under
the new rules should be similar to decisions made regarding other significant
regulatory changes affecting particular types of loans. Creditors, the regulators say, should
continue to evaluate fair lending risk as they would for other types of
products, monitoring policies and practices and implementing effective
The statement was being issued by
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.