At a congressional hearing this week, several House lawmakers defended a discrimination test favored by the Obama administration in which lenders could be held liable for fair housing violations if their policies had a “disparate impact” on minorities, regardless of whether the disparities were intentional.

But many lenders fear that a new “qualified mortgage” rule that will go into effect on Jan. 10 will put them at greater risk of scrutiny under the “disparate impact” test. That’s because qualified mortgages will offer lenders greater legal protections than non-QM loans, and many lenders are planning to make QM loans only.

But because such loans must meet certain underwriting criteria, including debt-to-income restrictions, lenders worry the criteria could inadvertently exclude minorities and other protected classes, leading to more fair housing investigations.

Last week, a case that could have resolved the constitutionality of the disparate impact test was settled, avoiding a review by the U.S. Supreme Court.

Source: National Mortgage News

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