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BOARD OF GOVERNORS

OF THE

FEDERAL RESERVE SYSTEM

WASHINGTON, D.C. 20551

DIVISION OF BANKING

SUPERVISION AND REGULATION

DIVISION OF CONSUMER AND 

COMMUNITY AFFAIRS

SR 13-20

CA 13-23

December 13, 2013

TO THE OFFICERS IN CHARGE OF SUPERVISION AND APPROPRIATE 

SUPERVISORY AND EXAMINATION STAFF AT THE FEDERAL RESERVE 

BANKS AND TO FINANCIAL INSTITUTIONS SUPERVISED BY THE FEDERAL 

RESERVE

SUBJECT: Interagency Statement on Supervisory Approach for Qualified and 

Non-Qualified Mortgage Loans

Applicability: This guidance applies to all institutions supervised by the Federal Reserve, 

including those with $10 billion or less in total consolidated assets. 

The Federal Reserve and the other federal financial institutions regulatory agencies1

issued the attached statement to clarify safety-and-soundness expectations and Community 

Reinvestment Act (CRA) considerations for regulated institutions engaged in residential 

mortgage lending in light of the Consumer Financial Protection Bureau’s (Bureau) Ability-toRepay and Qualified Mortgage Standards Rule (Ability-to-Repay Rule).2

 

The statement is intended to guide institutions as they assess the implementation of the 

Bureau’s Ability-to-Repay Rule, which takes effect January 10, 2014. From a safety-andsoundness perspective, the agencies emphasize that an institution may originate both qualified 

and non-qualified residential mortgage loans (QM and non-QM, respectively), based on its 

business strategy and risk appetite. The agencies will not subject a residential mortgage loan to 

 1 The other federal financial institutions regulatory agencies include the Federal Deposit Insurance Corporation, the 

National Credit Union Administration, and the Office of the Comptroller of the Currency.

2 See Ability-to-Repay and Qualified Mortgage Standards Rule under the Truth in Lending Act (Regulation Z), 78 

FR 6408 (Jan. 30, 2013), as amended. The Ability-to-Repay Rule requires institutions to make reasonable, good 

faith determinations that consumers have the ability to repay mortgage loans before extending such loans.
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safety-and-soundness criticism solely because of the loan’s status as a QM or non-QM loan. 

Regardless of whether a residential mortgage loan is a QM or non-QM, an institution should 

address key risk areas in residential mortgage lending, including loan terms, borrower 

qualification standards, loan-to-value limits, documentation requirements, and portfolio- and 

risk-management practices.

From a consumer protection perspective, the agencies responsible for conducting CRA 

evaluations do not anticipate that an institution’s decision to originate only QMs, absent other 

factors, would adversely affect its CRA evaluations. As recently addressed in the Interagency 

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

Standards Rule, the requirements of the Bureau’s Ability-to-Repay Rule and the fair lending 

laws are similarly compatible.3

 

Questions regarding this letter should be directed to the following individuals:

• Division of Banking Supervision and Regulation: David Emmel, Manager, at 

(202) 912-4602; or Donald Gabbai, Senior Supervisory Financial Analyst, at 

(202) 452-3358; or 

• Division of Consumer and Community Affairs: Carol Evans, Assistant Director, at 

(202) 452-2051; or Amy Henderson, Manager, at (202) 452-3140. 

In addition, institutions may send questions via the Board’s public website.4

Michael S. Gibson

Director

Division of Banking Supervision

and Regulation

Sandra F. Braunstein

Director

Division of Consumer

and Community Affairs

Attachment:

• Interagency Statement on Supervisory Approach for Qualified and Non-Qualified 

Mortgage Loans

Cross-reference to:

• CA letter 13-15, “Interagency Statement on Fair Lending Compliance and the Ability-toRepay and Qualified Mortgage Standards Rule”

 

3 Refer to CA letter 13-15, “Interagency Statement on Fair Lending Compliance and the Ability-to-Repay and 

Qualified Mortgage Standards Rule.”

4 See http://www.federalreserve.gov/apps/contactus/feedback.aspx.