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Ability to Repay​-Min Housing Provision for DTI

Answered by: 
Dan Persfull

Question: 
I was asked the following questions by a member of my bank's Senior Management Team. "In the event a consumer loan applicant does not own a residence, and he/she claims to not be responsible for any rent. Can a minimum housing provision (say $400) be used when calculating DTI for this customer? I have done lots of research, but so far I have not been able to find an answer one way or the other. I personally feel that it could be considered a violation, but I need to be able to reference what that violation would be?
Answer: 

I remember about 12-14 years ago the FDIC put out a bulletin addressing this issue. I've tried to find it several times but have been unable to locate it. It may have been a SCANS bulletin that was put out by the Chicago Region and those were not posted on the FDIC web site.

Now with that disclaimer the bulletin in a nutshell said by assigning debt where debt does not exist could/would present fair lending issues. The bank's underwriting should be based on what is known, not what they speculate may happen.

First published on 04/16/2017

Filed under: 
Lending
Filed under lending as: 
Ability to Repay

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