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Do strict mortgage rules create a fair housing risk?


 

WASHINGTON – Oct. 23, 2013 – Qualified mortgages (QM) limit loans’ financial risk, but lenders fear tight lending standards will also harm buyers protected under the nation’s fair housing laws.

However, the National Credit Union Administration issued a news release on behalf of five federal regulatory agencies saying they don’t expect the new stricter lending standards to impact fair lending rules and “elevate a supervised institution’s fair lending risk.”

The QM rule and the Fair Housing Act have somewhat conflicting goals since QM attempts to limit mortgage loans to truly qualified buyers, while the Fair Housing Act has rules intended to increase ownership among buyers protected by fair housing laws.

The Consumer Financial Protection Bureau’s (CFPB) Ability-to-Repay Rule requires creditors to make a reasonable, good faith determination that a consumer has the ability to repay a mortgage loan before extending credit to the consumer. It assumes lenders have complied with the Ability-to-Repay Rule if they issue a “Qualified Mortgage.”

On the other hand, the ECOA makes it illegal for a creditor to discriminate in any aspect of a credit transaction based on characteristics that include race, religion, marital status, color, national origin, sex and age.

In general, the agencies say that lenders should offer loan products based on the Ability-to-Repay rule. However, lenders should also continue to monitor the borrowers – as they have in the past – to evaluate the fair housing risk. They recommend “implementing effective compliance management systems.”

The federal agencies with supervisory authority for the Fair Housing Act (FHA) believe that the same principles apply in determining compliance with FHA lending.

The groups issuing the opinion include the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration and the Office of the Comptroller of the Currency.

A copy of the statement is available on the National Credit Union Administration’s website.

© 2013 Florida Realtors®

Related Topics: Fair housing