Regulators release clarifications for QM, non-QM loans

cfpbFederal regulators released clarification last week on safety and soundness expectations and considerations under the Community Reinvestment Act related to the qualified and non-qualified mortgages.

The clarifications were issued to provide guidance to institutions as they assess the implementation of the CFPB’s ability-to-repay and QM standards, effective Jan. 10.

The Federal Reserve, FDIC, National Credit Union Administration and OCC said residential mortgages will not be subject to safety-and-soundness criticism simply because of the loan’s status as a QM or non-QM loan.

Institutions are expected to continue to underwrite residential mortgages loans in a sound manner and address lending risks, including loan terms, borrower qualification standard, documentation and loan-to-value limits.

“Institutions also should apply appropriate portfolio and risk management practices,” the agencies said. “Institutions should continue to comply with the applicable guidance on residential mortgage lending issued by their respective federal regulators.”

Agencies responsible for conducting CRA evaluations do not anticipate that an institution’s decision to originate only QM mortgages would solely adversely affect CRA evaluations.

“As required by the CRA, the agencies assess institutions’ performance in helping to meet the credit needs of their communities, including low- and moderate-income neighborhoods, consistent with safe-and-sound operations,” the agencies said. “Each evaluation takes into account the unique performance context of the institution.”

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