QM Fails to Deter Bank from Offering IO Loans

Bank of the West will keep originating and holding in portfolio the interest-only loans that the Consumer Financial Protection Bureau’s new rules assign more liability to starting Friday.

"We extensively reviewed the CFPB's rules and found them broadly consistent with how Bank of the West has always done business. At the same time, we know that interest-only loans can fulfill the mortgage needs of many of our customers," says Paul Wible, senior EVP and head of the bank's national finance group.

Wible adds, "Our analysis confirmed what we believed when the new rules were announced: a well-underwritten, interest-only mortgage can be a good choice for our customers and they are safe for us to hold on our balance sheet."

The bank has held IO loans in portfolio for many years, and says it has reviewed its underwriting requirements to ensure that borrowers who get them have the ability to repay them once the IO period has expired.

"Interest-only loans meet the needs of certain customers, such as the self-employed, or those interested in cash flow," says Karen Mayfield, national sales manager for Bank of the West's mortgage banking division.

IO loans fall outside the “qualified mortgage” parameters for loans protected from new legal liabilities.

Comments (1)
I am glad that a major bank is stepping up and not running for the hills. As Karen Mayfield pointed out,these are safe loan products for customers (borrowers) that understand what they are getting.

I hope it goes one step further and gets back to a point that some lenders will reintroduce No-Income Doc Loans. These loans too serve a great purpose for the right segment of the borrowing public. Namely those that are self employed or rely on the bulk of income from commissions and that have substantial down payments (25% or more), have significant cash reserves after closing AND have great credit!

Brent Calver
a Private Money Lender
Posted by Brent C | Monday, January 06 2014 at 2:28PM ET
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