OCC Issues Guidance on Programs for Home Loans with Over 100 Percent LTV

Noting that in many communities persistently depressed home prices are hindering recovery, the OCC today issued guidance for OCC-regulated banks seeking to develop programs to offer home loans with loan-to-value ratios of over 100 percent, known as “higher-LTV” loans. These programs may be eligible for Community Reinvestment Act credit.

“The OCC recognizes that supporting long-term community revitalization may necessitate responsible, innovative lending strategies,” the agency said. “The OCC believes that in some circumstances, a bank also can design a program to offer higher-LTV loans in communities targeted for revitalization in a manner consistent with safe and sound lending practices and current regulations and guidelines.”

Such programs would apply to purchase loans or purchase plus rehabilitation of owner-occupied properties in communities “officially targeted” for revitalization by federal, state, municipal or other government-designated entities. Eligible loans would be permanent first-lien mortgages with LTV ratios exceeding 100 percent, without mortgage insurance or other acceptable collateral and with an original loan balance of $200,000 or less.

The guidance also provides information about the required policies and procedures under such a program and about the process and timing for notifying the OCC about starting or modifying a program. “Bank lending under such a program may serve the credit needs of individual borrowers and the community, and the bank may receive Community Reinvestment Act consideration depending on the specifics of the program,” the agency added. For more information, contact ABA’s Rob Rowe or Krista Shonk.