Four federal regulators, including the NCUA, said in a joint statement sent to financial institutions on Friday that the CFPB’s new mortgage rules are compatible with the Community Reinvestment Act.
“The agencies recognize that some institutions may originate only or predominantly QMs, particularly when the bureau’s Ability-to-Repay Rule first takes effect. In fact, the agencies note that some institutions’ existing business models are such that all of the loans they originate satisfy the requirements for QMs,” said the guidance.
“The requirements of the bureau’s Ability-to-Repay Rule and the fair lending laws are compatible. Similarly, the requirements of the bureau’s Ability-to-Repay Rule and CRA are compatible. 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,” it said.
Under the CRA, the agencies are required to assess the performance of financial institutions in addressing the credit needs of their communities, including “low and moderate-income neighborhoods, consistent with safe‑and‑sound operations.”
“The agencies recognize that many institutions are in the process of assessing how to implement the bureau’s Ability-to-Repay Rule. The agencies emphasize that institutions may originate both QMs and non-QMs, based on their business strategies and risk appetites. Residential mortgage loans will not be subject to safety-and-soundness criticism based solely on their status as QMs or non-QMs,” said the statement.
“Regardless of whether residential mortgage loans are QMs or non-QMs, the agencies continue to expect institutions to underwrite residential mortgage loans in a prudent fashion and address key risk areas in their residential mortgage lending, including loan terms, borrower qualification standards, loan-to-value limits, and documentation requirements.”
The rules take effect on Jan. 10, 2014.