In response to inquiries, five federal agencies have issued a statement offering guidance about the fair lending risk banks may pick up if they choose to only offer Qualified Mortgages. Those agencies were asked whether regulators would use disparate impact theory to assert banks are violating the Equal Credit Opportunity Act if they limit their home loans to Qualified Mortgages.
According to the October 22 statement, “the five agencies do not anticipate that a creditor’s decision to offer only Qualified Mortgages would, absent other factors, elevate a supervised institution’s fair lending risk.” The agencies did not outline what other factors might elevate an institution’s fair lending risk in this regard.
While pointing out that there are other ways to satisfy the Ability-to-Repay rule besides offering only QM loans, the statement acknowledged that “some creditors might be inclined to originate all or predominantly Qualified Mortgages” and “that creditors may have a legitimate business need to fine-tune their product offerings over the next few years in response” to new regulations or changes in economic or mortgage market conditions.
In prepared remarks at the October 21 ABA convention, CFPB director Richard Cordray also emphasized the bureau’s willingness to make allowances, saying that its “oversight of the new mortgage rules in the early months will be sensitive to . . . good-faith efforts to come into substantial compliance on time.”
Going into further detail, the statement said that any fair lending risk would not be “substantially different” from what creditors have faced before. As an example, the agencies say they “are unaware of any ECOA or Regulation B challenges to” decisions to stop offering loans subject to the Home Ownership and Equity Protection Act after its implementation in 1995.
Rather, the agencies expect 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 agencies issuing the statement are the Consumer Financial Protection Bureau, Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and National Credit Union Administration.