U.S. regulators on Tuesday said they do not expect lenders to run afoul of fair-lending laws if they opt to issue only the most basic mortgages after tough new rules take effect in 2014.
The Consumer Financial Protection Bureau plans to begin enforcing a rule in January that requires mortgage lenders to verify borrowers can repay their loans. Many banks said they would comply at first by making only the least risky loans, also known as "qualified mortgages."
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At the same time, lenders and their lawyers worried that making only those basic loans would exclude certain minority groups. They asked regulators whether that could violate U.S. laws that prohibit discriminatory lending programs.
On Tuesday, the consumer bureau, Federal Reserve and other bank regulators, said in a statement that lenders should be able to comply with the ability-to-repay requirement without violating fair-lending laws.
"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 regulators said.
The consumer bureau, which was created by the 2010 Dodd-Frank law, has said lenders who made qualified mortgages - loans with no risky features that are made to borrowers with relatively little debt - would receive some protection from lawsuits related to the ability-to-repay rule.
Regulators said they recognized that some lenders would only make those most basic loans when the rule first takes effect.
They said lenders have made product changes in response to new rules in the past without violating fair-lending laws and should be able to do so again.
"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," the agencies said.
Circumstances of individual cases would be taken into consideration by bank supervisors, the regulators said.
(Reporting by Emily Stephenson; Editing by Kenneth Barry)