Industry News

States urged to follow federal guidance on subprime loans

Group says at least 26 states plan to adopt standard

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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 ...