Highlights:
The best practices listed below and in the attached
document are not intended as supervisory guidance, but
are being provided to banks for informational purposes as
a summary of issues discussed at the forum. Banks are
encouraged to review and consider the best practices in
the context of their LMI mortgage lending programs.
- Back-to-Basics Underwriting - Basic, traditionally
underwritten, 30-year fixed-rate mortgages are the most
suitable mortgages for most LMI borrowers.
- Incentives/Compensation - Ensuring that all parties to
mortgage transactions have a long-term stake in the
outcome of the transactions will improve the quality of LMI
mortgages.
- Transparency and Due Diligence - Improved transparency
throughout the mortgage process is critical to reviving the
secondary market for LMI mortgages.
- Expanding Existing Products and Innovations - A variety
of existing and proposed products and processes may
increase availability of LMI mortgage credit, including
extending amortization schedules, expanding alternative
underwriting processes for consumers with limited credit
history, and creating innovative insurance products to
address temporary income disruptions, among other
things.
- Public/Private Partnerships - Partnerships with community
organizations, nonprofit corporations, banks, borrowers,
local government, and others facilitate credit
enhancements and home ownership counseling that make
responsible LMI mortgage lending possible.
Distribution:
FDIC-Insured Institutions (Commercial and Savings)
Suggested Routing:
Chief Executive Officer
Chief Loan Officer
Chief Compliance Officer
Board of Directors
Attachment:
Best Practices from the FDIC's Forum on Mortgage Lending for Low- and Moderate-Income Households
Best Practices from the FDIC's Forum on Mortgage Lending for Low- and Moderate-Income Households (PDF Help)
Contact:
Special Advisor Rae-Ann Miller at rmiller@fdic.gov
or 202-898-3898
Printable Format:
FIL-88-2008 (PDF Help)
Note:
FDIC financial institution letters (FILs) may be
accessed from the FDIC's Web site at
www.fdic.gov/news/news/financial/2008/index.html.
To receive FILs electronically, please visit
http://www.fdic.gov/about/subscriptions/fil.html.
Paper copies of FDIC financial institution letters
may be obtained through the FDIC's Public
Information Center, 3501 Fairfax Drive, E-1002,
Arlington, VA 22226 (1-877-275-3342 or 703-562-
2200).
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