The NCUA, along with the Board of Governors of the Federal Reserve System, Office of the Comptroller of Currency and the FDIC issued a statement to clarify safety and soundness expectations and Community Reinvestment Act considerations for regulated institutions engaged in residential mortgage lending in light of the CFPB’s Ability to Repay Rule, effective Jan. 10, 2014.
The agencies emphasize that institutions may originate both qualified mortgages (QMs) and non-qualified mortgages, based on their business strategies and risk appetite. Residential mortgage loans will not be subject to safety and soundness criticism based solely on their status as QMs or non-QMs. Regardless of qualified status or not, the agencies continue to expect institutions to underwrite residential mortgage loans in a prudent fashion and address key risk areas, including loan terms, borrower qualification standards, loan-to-value limits and documentation requirements. Institutions should also apply appropriate portfolio and risk management practices.
The agencies’ statement can be found here.