A number of the big banks will defy the tighter lending standards that are set to kick in next month, and will offer loans that don’t meet the definition of a qualified mortgage, a new designation intended to show that borrowers can afford their mortgages.
Wells Fargo executives said that the bank would make some loans that don’t meet the qualified mortgage standards. Their statements were echoed by representatives of JPMorgan Chase, Bank of America and Citigroup.
“It’s clear the borrowers we’re lending to today have an ability to repay,” Brad Blackwell, executive vice president of Wells Fargo Home Mortgage, told the Wall Street Journal. “We don’t see a significant reason to contract our lending … because these are very high-quality borrowers,” he said.
To be sure, lenders are not forbidden from making loans that don’t meet qualified mortgage standards. They could, however, face greater legal liability on such mortgages, according to the Journal. Mortgage investors are also likely to steer clear of purchasing such loans, according to the newspaper. [WSJ] – Hiten Samtani