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the latest SERVICING Some bankers are concerned that their operations may run counter to the guidelines outlined in the ECOA. consumer has the ability to repay a mortgage loan before extending the consumer credit." In response to CFPB's rulemaking, some bankers have indicated they might limit their offerings to only QM products as the transition is made—and many are concerned as a result that their operations may run counter to the guidelines outlined in the Equal Credit and Opportunity Act (ECOA), implemented by the Federal Reserve's Regulation B. However, those fears are unfounded, regulators say. "In the agencies' view, the requirements of the ability-to-repay rule and ECOA are compatible. ECOA and Regulation B promote creditors acting on the The M Report | 47 se c on da r y m a r k e t F ive federal agencies issued a statement recently assuring creditors that they do not run the risk of being found in violation of fair lending laws should they choose to only originate "qualified mortgages" (QM) as defined earlier in the year. The Consumer Financial Protection Bureau (CFPB), one of the five issuers of the released statement, handed down in January a number of guidelines for lenders to follow in order for their loans to be classified as QM (and thus "safe" should legal action arise). A major provision of those guidelines is the ability-torepay rule (ATR), which requires creditors "to make a reasonable, good faith determination that a a na ly t ic s Federal agencies assuage creditors' fears that the mandates will affect fair lending laws. s e r v ic i ng New Rules Won't Affect Fair Lending basis of their legitimate business needs," the interagency release reads. "Viewed in this context, and for the reasons described below, the agencies do not anticipate that a creditor's decision to offer only qualified mortgages would, absent other factors, elevate a supervised institution's fair lending risk." The agencies also note that "there are several ways to satisfy the ability-to-repay rule, including making responsibly underwritten loans that are not qualified mortgages," saying they "do not believe that it is possible to define by rule every instance in which a mortgage is affordable for the borrower." With creditors having to consider a balance of secondary market opportunities, capital requirements, and credit and liability risk, regulators say they expect there will be a need for most businesses to fine-tune their products in response—something they should be used to, given the industry's radical changes over the last few years. "Some creditors, for example, decided not to offer higherpriced mortgage loans after July 2008, following the adoption of various rules regulating these loans or previously decided not to offer loans subject to the Home Ownership and Equity Protection Act after regulations to implement that statute were first adopted in 1995," the release said. "We are unaware of any ECOA of Regulation B challenges to those decisions." In making the transition in 2014, the agencies say creditors should carefully monitor their own policies and practices and implement effective compliance management systems the way they would do for other product selections. "As with any other compliance matter," they say, "individual cases will be evaluated on their own merits." Aside from CFPB, other agencies behind the release include the Federal Reserve, the FDIC, the Office of the Comptroller of the Currency, and the National Credit Union Administration. Or ig i nat ion and that none of the violations harmed borrowers in any way. "Mortgage Master has a strong commitment to comply flawlessly with all reporting requirements . . . . We have addressed the system issues that caused the reporting errors, and we are in the process of verifying the accuracy of all data through the end of [the] second quarter of 2013," the company said. Washington Federal is required to pay $34,000 in addition to making the same changes to its reports and compliance system. In its own statement, Washington Federal said it agreed to the consent order because it did not believe the technical issues involved or the penalty justified litigation. The bank did, however, protest against the language in CFPB's announcement, saying it was inconsistent with prior discussions, "including [the agency's] repeated statements to us that the order is the equivalent of a 'traffic ticket.'" "For the record, the consent order relates to very technical interpretations of application data, such as date of application, on a sample of files reviewed during an examination occurring over a year ago," the statement reads. "While we differ with their conclusions, we also realize that the CFPB has the final say and we will strive to meet their expectations in future examinations." Since CFPB discovered the inaccuracies, the bureau says both entities "have been taking steps to improve their HMDA compliance management systems and the accuracy of their HMDA mortgage loan information." The agency also took the opportunity to issue a bulletin outlining how it enforces the HMDA. Another bulletin was issued describing CFPB's resubmission schedule and guidelines and setting a standard for error thresholds that examination teams will use to determine when institutions should correct and resubmit their data. The new guidelines apply to reviews that begin on or after January 18, 2014.

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