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Consumer Financial Protection Bureau
Office of the Comptroller of the Currency
Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
National Credit Union Administration

Interagency Statement on Fair Lending Compliance
and the Ability-to-Repay and Qualified Mortgage Standards Rule

The Consumer Financial Protection Bureau (Bureau), Office of the Comptroller of the
Currency (OCC), Board of Governors of the Federal Reserve System (Board), Federal Deposit
Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA)
(collectively, the Agencies) are issuing this statement in response to inquiries from creditors
about whether they would be liable under the disparate impact doctrine of the Equal Credit
Opportunity Act (ECOA), 15 U.S.C. 1691 et seq., and its implementing regulation, Regulation
B, 12 C.F.R. Part 1002, by originating only Qualified Mortgages as defined under the Bureau’s
recent Ability-to-Repay and Qualified Mortgage Standards Rule (Ability-to-Repay Rule), which
implements provisions of the Truth in Lending Act (TILA). 1 The Agencies’ general approach
and expectations regarding fair lending, including the disparate impact doctrine, are summarized
in prior guidance. 2
The Agencies are issuing this statement to describe some general principles that will
guide supervisory and enforcement activities with respect to entities within their jurisdiction as
the Ability-to-Repay Rule takes effect in January 2014. 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 basis of their legitimate business needs. 3 Viewed in this context, and for
the reasons described below, the Agencies do not anticipate that a creditor’s decision to offer
1

See http://www.consumerfinance.gov/regulations/ability-to-repay-and-qualified-mortgage-standards-under-thetruth-in-lending-act-regulation-z/. Disparate impact is one of the methods of proving lending discrimination under
ECOA. See 12 C.F.R. pt. 1002 & Supp. I.
2

For example, in 1994, eight federal agencies published the Policy Statement on Discrimination in Lending, 59 Fed.
Reg. 18,266 (Apr. 15, 1994), and last year the Bureau issued a bulletin on lending discrimination, CFPB Bulletin
2012-04 (Fair Lending) (Apr. 18, 2012). In addition, the OCC, Board, FDIC, NCUA, and Bureau each have fair
lending examination procedures.
3

For example, even where a facially neutral practice results in a disproportionately negative impact on a protected
class, a creditor is not liable provided the practice meets a legitimate business need that cannot reasonably be
achieved as well by means that are less disparate in their impact. See 12 C.F.R. §1002.6; 12 C.F.R. pt. 1002, Supp.
I, § 1002.6, ¶ 6(a)-2.

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only Qualified Mortgages would, absent other factors, elevate a supervised institution’s fair
lending risk.
The Bureau’s Ability-to-Repay Rule implements provisions of the Dodd-Frank Act that
require creditors to make a reasonable, good faith determination that a consumer has the ability
to repay a mortgage loan before extending the consumer credit. 4 TILA and the Ability-to-Repay
Rule create a presumption of compliance with the ability-to-repay requirements for certain
“Qualified Mortgages,” which are subject to certain restrictions as to risky features, limitations
on upfront points and fees, and specialized underwriting requirements. However, consistent with
the statutory framework, there are several ways to satisfy the Ability-to-Repay Rule, including
making responsibly underwritten loans that are not Qualified Mortgages. The Bureau does not
believe that it is possible to define by rule every instance in which a mortgage is affordable for
the borrower. Nonetheless, the Agencies recognize that some creditors might be inclined to
originate all or predominantly Qualified Mortgages, particularly when the Ability-to-Repay Rule
first takes effect. The Rule includes transition mechanisms that encourage preservation of access
to credit during this transition period.
In selecting business models and product offerings, we expect that creditors would
consider demonstrable factors that may include credit risk, secondary market opportunities,
capital requirements, and liability risk. The Ability-to-Repay Rule does not dictate precisely
how creditors should balance such factors, nor do either TILA or ECOA. As creditors assess
their business models, the Agencies understand that implementation of the Ability-to-Repay
Rule, other Dodd-Frank Act regulations, and other changes in economic and mortgage market
conditions have real world impacts and that creditors may have a legitimate business need to
fine-tune their product offerings over the next few years in response.
Indeed, the Agencies recognize that some creditors’ existing business models are such
that all of the loans they originate will already satisfy the requirements for Qualified Mortgages.
For instance, a creditor that has decided to restrict its mortgage lending only to loans that are
purchasable on the secondary market might find that—in the current market—its loans are
Qualified Mortgages under the transition provision that gives Qualified Mortgage status to most
loans that are eligible for purchase, guarantee, or insurance by Fannie Mae, Freddie Mac, or
certain federal agency programs.
With respect to any fair lending risk, the situation here is not substantially different from
what creditors have historically faced in developing product offerings or responding to
regulatory or market changes. The decisions creditors will make about their product offerings in
response to the Ability-to-Repay Rule are similar to the decisions that creditors have made in the
past with regard to other significant regulatory changes affecting particular types of loans. Some
creditors, for example, decided not to offer “higher-priced 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. We are unaware of any ECOA or Regulation B
4

See Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 1411, 124 Stat. 1376,
2142 (2010) (codified at 15 U.S.C. § 1639c).

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challenges to those decisions. Creditors should continue to evaluate fair lending risk as they
would for other types of product selections, including by carefully monitoring their policies and
practices and implementing effective compliance management systems. As with any other
compliance matter, individual cases will be evaluated on their own merits.
The OCC, the Board, the FDIC, and the NCUA believe that the same principles described
above apply in supervising institutions for compliance with the Fair Housing Act (FHA), 42
U.S.C. § 3601 et seq., and its implementing regulation, 24 C.F.R. Part 100. 5

October 22, 2013

5

The OCC, Board, FDIC, and the NCUA have supervisory authority as to the FHA.

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