WASHINGTON, DC -- The Office of the Comptroller of the
Currency (OCC) today issued residential real estate lending standards as an
additional step to protect against national banks becoming involved in predatory, abusive, unfair, or deceptive
residential mortgage lending practices.
The OCC is committed to ensuring that abusive lending
practices do not gain a foothold in the national banking system, said Julie L.
Williams, acting Comptroller of the Currency.
The new guidelines incorporate key provisions and central
principles of the OCCs February, 2003 advisory letters alerting national banks
to practices that may be considered predatory or abusive and advising national
banks on measures to avoid such practices.
The advisories addressed national banks mortgage origination activity,
as well as purchases of loans and use of third-party brokers to conduct
mortgage lending. National banks are
expected to implement anti-predatory lending standards consistent with and
appropriate to the size and complexity of the bank and the nature and size of
its lending activities.
In January 2004, the OCC added a regulatory prohibition on
making mortgage loans based predominantly on the banks realization of
foreclosure or liquidation value of the collateral, without regard to the
borrowers ability to repay the loan according to its termsa prohibition that
addresses a central characteristic of predatory lending. In that same rulemaking, the OCC also added
provisions prohibiting banks from engaging in unfair or deceptive practices under
the Federal Trade Commission Act.
The guidelines issued today for residential mortgage lending
standards describe particular practices that are inconsistent with sound
mortgage lending practices. They
describe other practices that may be conducive to abusive lending, depending on
the circumstances, and which, accordingly, warrant a heightened degree of care
by bankers.
The guidelines focus on the substance of a banks
activities and practices, said acting Comptroller Williams, not on the
creation of another set of bank policies.
The standards described in the guidelines are enforceable
pursuant to section 39 of the Federal Deposit Insurance Act and the
implementing process set forth in part 30 of the OCCs regulations. If the OCC believes a banks practices fail
to meet the standards in the guidelines, the OCC may require submission of a
corrective plan by the bank. If the
national bank fails to submit a plan, or to comply with it, the OCC may issue a
cease and desist order against the bank.
Orders are formal, public documents, and they may be enforced in
district court or through the assessment of civil money penalties.
The guidelines take effect 60 days after their publication in the Federal Register.
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The
Office of the Comptroller of the Currency was created by Congress to charter
national banks, to oversee a nationwide system of banking institutions, and to
assure that national banks are safe and sound, competitive and profitable, and
capable of serving in the best possible manner the banking needs of their
customers.