Federal regulators have instructed their examiners not to raise concerns when banks, thrifts or credit unions originate non-qualified mortgage loans provided they are prudently underwritten.
In a joint statement, the regulatory agencies emphasized that an institution is free to “originate both QM and non-QM loans based on its business strategy and risk appetite.” And examiners will not criticize a loan solely because of its non-QM status.
“Regardless of whether residential mortgage loans are QMs or non-QMs, the agencies continue to expect institutions to underwrite residential mortgage loans in a prudent fashion and address key risk areas in their residential mortgage lending, including loan terms, borrower qualification standards, loan-to-value limits, and documentation requirements,” the joint statement says.
The agencies also want to assure executives that they will not run afoul of their Community Reinvestment Act obligations if they don’t originate non-QM loans.
“From a consumer protection perspective, the agencies responsible for conducting CRA evaluations do not anticipate that an institutions’ decision to originate only QM loans, absent other factors, would adversely affect their CRA evaluations,” according to the agencies.
The Federal Reserve Board, OCC, FDIC and NCUA administration issued the joint statement.
Separately, the Department of Housing and Urban Development has issued its final QM rule for FHA-insured loans. The HUD rule goes into effect January 10.