Industry welcomes internal subprime controls
WASHINGTON – Federal financial regulatory agencies have issued a joint final statement on subprime mortgage lending, to address issues relating to adjustable-rate mortgage (ARM) products that can cause payment shock. The agencies involved include the Federal Reserve System, the Office of the Comptroller of Currency, the Federal Deposit Insurance Corporation, the Department of Treasury and the National Credit Union Administration.
The statement has been issued in the wake of the subprime crisis – the effects of which mortgage lenders and some investment banks are still reeling from. It includes directives saying subprime ARM loans should be underwritten at fully indexed rates with fully amortising repayment schedules, and maintains that income verification is a crucial step in the lending process. It also encourages lenders
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