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Agencies Issue Statement on Supervisory Approach for Qualified and Non-Qualified Mortgage Loans

 

Dec 16 - Four federal financial institution regulatory agencies have issued a statement to clarify safety-and-soundness expectations and Community Reinvestment Act considerations related to Qualified Mortgage loans and non-Qualified Mortgage loans offered by regulated institutions.

The statement is intended to guide institutions as they assess the implementation of the Consumer Financial Protection Bureau’s Ability-to-Repay and Qualified Mortgage Standards Rule, which takes effect Jan. 10, 2014. From a safety-and-soundness perspective, the agencies emphasize that an institution may originate both Qualified Mortgage and non-Qualified Mortgage loans, based on its business strategy and risk appetite. The agencies will not subject a residential mortgage loan to safety-and-soundness criticism solely because of the loan’s status as a Qualified Mortgage or non-Qualified Mortgage loan. The agencies continue to expect institutions to underwrite residential mortgage loans in a prudent fashion and address key risk areas in residential mortgage lending, including loan terms, borrower qualification standards, loan-to-value limits, documentation requirements, and portfolio- and risk-management practices, regardless of whether a residential mortgage loan is a Qualified Mortgage or non-Qualified Mortgage.

From a consumer protection perspective, the agencies responsible for conducting CRA evaluations do not anticipate that institutions’ decision to originate only Qualified Mortgages, absent other factors, would adversely affect their CRA evaluations.

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