[shea930]

We plan on basing our underwriting standards for all ATR rules on the Appendix Q guidelines. We realize this may be the hardest route to go but wanted a good structured guide for our lending staff to follow to improve underwriting overall. Do you think this may cause any fair lending problems due to stricter underwriting?

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[rcooper]

As you probably know, there has been the discussion that if a bank decides to only make QM loans that could open the door to potential fair lending concerns. The banking agencies put out a statement that making only QM would not necessarily create fair lending issues, but banks need to continue and increase fair lending monitoring during implementation of these new rules to ensure there is no disparate impact/fair lending concerns. The interagency statement is linked here: https://www.federalreserve.gov/newsevents/press/bcreg/20131022a.htm.

I believe you are in the a similar situation if you decide to utilize Appendix Q for underwriting all applicable loans. On the surface there probably isn’t an issue, but you’ll need to carefully and heavily monitor fair lending to ensure this new underwriting policy isn’t creating disparate impact. Here is also an article on fair lending concerns: https://www.mondaq.com/unitedstates/x/272916/Financial+Services/Interagency+Fair+Lending+Guidance+A+First+Step+But+In+The+Right+Direction

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