Federal Regulators Issue Statement on Fair Lending Compliance and the Ability-to-Repay and Qualified Mortgage Rules

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In response to inquiries from creditors about liability under the Equal Credit Opportunity Act’s disparate impact doctrine on originating qualified mortgages under the CFPB’s ability-to-repay provisions (see January 10, 2013 Alert), the CFPB, OCC, FRB, FDIC and NCUA issued a joint statement addressing creditors concerns about potential liability under the ECOA’s disparate impact doctrine on originating qualified mortgages. The agencies view the requirements of the ability-to-repay rule and ECOA as “compatible,” and as a result, 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 also noted that while the ability-to-repay rule create a presumption of compliance with certain qualified mortgages, there are other ways to satisfy the ability-to-repay rule, including “making responsibly underwritten loans” that are not qualified mortgages. The agencies noted that the ability-to-repay and qualified mortgage rule includes “transition mechanism[s] that encourage preservation of access to credit” during the transition period. Finally, the agencies noted that the situation was not “substantially different” that what creditors faced in the past in developing product offerings or responding to regulatory or market changes. For example, the agencies noted that although some creditors decided not to offer higher-priced mortgages once provisions implementing HOEPA became effective, it was unaware of challenges to creditors alleging violations of ECOA or Regulation B.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Topics:  Ability-to-Repay, CFPB, ECOA, Fair Lending, FDIC, Federal Reserve, Mortgages, NCUA, OCC, Qualified Mortgage Rule

Published In: General Business Updates, Consumer Protection Updates, Finance & Banking Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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