Industry News

Comptroller urges stronger mortgage underwriting

Dugan sympathetic to bankers' concerns about level playing field
Published on Oct 18, 2006

A top banking regulator says states must follow the federal government's lead and institute stronger underwriting and disclosure requirements for lenders who offer exotic mortgages. Speaking at an annual convention of community bankers, Comptroller of the Currency John C. Dugan said he sympathized with concerns that new guidelines for nontraditional mortgages apply only to federally insured banks. The guidelines, issued Sept. 29, direct banks to analyze a borrower's ability to repay interest-only mortgages and payment-option, negative amortization loans at the fully indexed rate. Banks must take into account not only the initial loan amount but any additional balance that may accrue through negative amortization. The guidelines also say banks should fully and clearly disclose the potential that their loan payments may increase to borrowers. Bankers protested that because the guidelines would only apply to federally insured institutions, putting them at a competitive disadvantage to n...

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