Dear Board of Directors and Chief Executive Officer:
The enclosed letter to NCUA examiners provides a preview of how credit union mortgage lenders will be expected to comply with the Consumer Financial Protection Bureau (CFPB)’s recently finalized rule on Ability-to-Repay (ATR) and Qualified Mortgages (QMs).
This rule becomes effective January 10, 2014, and applies to all federally insured credit unions.
As with any new requirement in its early stages after becoming effective, NCUA field staff will take into account a credit union’s good-faith efforts to comply with the new rule.
NCUA field staff will be placing particular emphasis on the safety and soundness implications of mortgage lending under this new paradigm. Whether your credit union originates Qualified or non-Qualified Mortgages, examiners will be evaluating credit risk, liquidity risk, and concentration risk.
I want to emphasize that credit unions may originate both Qualified and non-Qualified Mortgages. Non-QM lending can be an effective member service if conducted safely and soundly. NCUA will not subject a mortgage to safety-and-soundness criticism solely because of the loan’s status as a QM or non-QM. Credit unions choosing to make non-QMs will need to take into account the potential new market and legal risks.
The enclosed Supervisory Letter also describes specific examination procedures and expectations for credit union mortgage lenders.
I encourage you to review both letters and to contact your regional office or state supervisory authority if you have any questions.