Federal regulators will coordinate with state agencies to police subprime lenders, including subsidiaries of banks and thrift holding companies and the mortgage brokers they work with.
Under a pilot program announced Tuesday, the Federal Reserve, the Office of Thrift Supervision and the Office of Thrift Supervision will evaluate nondepository lenders’ underwriting and risk-management practices for compliance with federal consumer-protection regulations and laws. The laws include the Home Mortgage Disclosure Act, the Equal Credit Opportunity Act, the Truth in Lending Act, the Real Estate Settlement Procedures Act, the Federal Trade Commission Act, and the Home Ownership and Equity Protection Act
State agencies will conduct coordinated examinations of independent state-licensed subprime lenders and mortgage brokers, sharing information about their reviews and investigations. State agencies collaborating on the program are represented by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators.
The pilot program is to kick off in the fourth quarter, with agencies selecting a sample of lenders under their jurisdiction for review or investigation.
The Federal Reserve has been under fire from some lawmakers, who say it hasn’t done enough to stop abusive subprime lending practices. Federal Reserve Chairman Ben Bernanke has said the Fed could use its rule-making authority to ban some mortgage lending practices as unfair and deceptive, but has concentrated on issuing guidelines and improving the disclosures lenders provide to borrowers.