Bank Systems & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Core Systems

12:44 PM
Connect Directly
RSS
E-Mail
50%
50%

Regulators Warn on Home Equity Lending

Institutions' credit risk management practices for home equity lending have not kept pace with trends, according to federal banking regulators.

From rising home values, low interest rates and the tax advantage of mortgage interest payments, consumers have borrowed record amounts against the equity in their homes.

Now, federal banking regulators have raised the caution flag.

In a guidance issued by the OCC, the Federal Reserve, the FDIC, the OTS and the NCUA, the regulators found that "in many cases, institutions' credit risk management practices for home equity lending have not kept pace with the product's rapid growth and easing of underwriting standards."

Specifically under scrutiny are loan products such as interest-only loans; "low-doc" and "no-doc" lending practices; loans with higher loan-to-value and debt-to-income ratios; acceptance of customers with lower credit risk scores; the use of automated valuation models; and an increased dependence on third party loan brokers.

The guidance recommends the adoption of more comprehensive credit risk management systems.

The full report can be found at: https://www.occ.treas.gov/ftp/bulletin/2005-22a.pdf

Comment  | 
Print  | 
More Insights
Register for Bank Systems & Technology Newsletters
Slideshows
Video
Bank Systems & Technology Radio
Archived Audio Interviews
Join Bank Systems & Technology Associate Editor Bryan Yurcan, and guests Karen Massey and Jerry Silva from IDC Financial Insights, for a conversation about the firm's 11th annual FinTech rankings.