The Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, the National Credit Union Administration, and the Office of the Comptroller of the Currency (the “Prudential Regulators”) have issued an Interagency Statement on Supervisory Approach for Qualified and Non-Qualified Mortgage Loans (the “Interagency Statement”). In anticipation of the January 10, 2014 effective date of the CFPB’s Ability to Repay and Qualified Mortgage (“QM”) Standards Rule (the “Rule”), the Interagency Statement seeks to clarify the Prudential Regulators’ safety and soundness and CRA expectations.
In recognition of the fact that lenders may originate both QMs and non-QMs based on their individual business strategies and risk appetites, the Interagency Statement provides assurance that no safety and soundness-based criticism will be based solely on a loan’s status as a QM or non-QM. Rather, the examination focus would continue to be on prudent underwriting, sound risk management practices, observation of loan-to-value limits, and adequate documentation.
Furthermore, as with a similar interagency statement relating to the Rule and fair lending laws, about which we have blogged previously, the Prudential Regulators regard the Rule as compatible with the Community Reinvestment Act (“CRA”) and do not expect an institution’s decision to originate only QMs would, viewed in isolation, adversely affect its CRA rating. That rating will focus on the unique performance context of the institution in meeting the credit needs of the communities it serves, including low- and moderate-income neighborhoods.