The Conference of State Bank Supervisors has issued a statement on subprime lending that’s intended to speed adoption of recently issued federal guidance at the state level.
Finalized on June 29, the federal guidance — which instructs banks and other lenders making many types of adjustable-rate mortgage (ARM) loans to qualify borrowers at the fully indexed rate — does not apply to lenders regulated by the states.
The CSBS statement on subprime lending is based on the federal guidance, which also includes tighter restrictions on prepayment penalties and stated-income loans. By providing uniform language for state regulators to adopt, the group seeks to avoid different interpretations of the federal guidance from state to state.
According to CSBS, at least 26 states are planning to adopt the statement on subprime lending.
CSBS — which seeks to protect the rights of states to regulate non-federally chartered lenders — played a similar role in persuading states to adopt an earlier set of federal guidance for nontraditional or “exotic” interest-only and pay-option loans. Since the guidance for exotic loans was finalized last fall, 34 states have followed suit, according to CSBS.
The CSBS statement on subprime lending was also endorsed by the American Association of Residential Mortgage Regulators and the National Association of Consumer Credit Administrators
But the Mortgage Bankers Association, which had protested that federal guidance creates an uneven playing field for federally chartered lenders, said the CSBS statement does not eliminate the need for federal legislation creating a uniform national standard to combat predatory lending. The MBA advocates a uniform national anti-predatory-lending standard that would preempt state and local rules.