In a joint letter with other trade associations yesterday, ABA expressed support for the OCC’s proposed risk management guidance for banks making higher loan-to-value ratio loans in communities targeted for revitalization. The guidance provides a framework for institutions wishing to set up mortgage programs allowing potential homeowners to secure purchase or purchase/rehabilitation loans in excess of supervisory LTV limits.
The groups called the OCC’s proposal “reasonable” but cautioned the OCC that some aspects of the proposal—such as the need for board approval of detailed policies and quarterly reporting requirements—impose an unnecessary burden on banks, and they argued that existing risk management frameworks should be sufficient to oversee this type of lending. They further urged the OCC to involve the CFPB and the Department of Housing and Urban Development in the issuance of the final bulletin to provide more protection to banks against claims that higher LTV loans made according to approved policies and procedures could be seen as violations of consumer regulation or lending standards. For more information, contact ABA’s Bob Davis.