To address industry concerns about the potential fair lending conflicts between the Qualified Mortgage Rule (QM) and fair lending rules under the Equal Credit Opportunity Act (ECOA), five federal regulatory agencies issued guidance clarifying that an institution’s decision to offer only Qualified Mortgages should not, absent other factors, elevate the institution’s fair lending risk. The CFPB, OCC, Federal Reserve, FDIC, and NCUA together issued the interagency guidance.
Many institutions plan to primarily issue QM loans to obtain safe harbor under the CFPB rules taking effect in January 2014. Because QM loans will require a stricter ability-to-repay analysis and underwriting standards, the industry has been wary of potential liability for violating fair lending laws under ECOA and Regulation B. The guidance attempts to ease these concerns and recognizes that creditors “may have a legitimate business need to fine-tune their product offerings” in response to the new mortgage regulations.
The interagency guidance noted that the situation is similar to previous product changes made in response to regulatory or market conditions. For example, today many creditors restrict their product offerings to loans purchasable by GSEs (future QM loans) and in 2008 some stopped offering higher-priced mortgage loans because of stricter regulatory requirements.
Going forward, the Agencies suggest that “creditors should 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.”
Read More: Interagency Statement