Council Proposes 'Responsible' B&C Standards

The White House Council on Financial Literacy is recommending underwriting standards for "responsible" subprime lending in an effort to encourage lenders to make this form of mortgage credit available again in low- and moderate-income communities. The council's report highlights the differences between responsible and irresponsible subprime mortgage lending. It also recommends parameters for fixed- and adjustable-rate subprime mortgages that the council says would benefit borrowers. Council Vice Chairman John Hope Bryant said one feature recommended by the council would benefit borrowers who have made their payments on time but suddenly face the loss of a job or death in the family. "Nobody loses, the person gets six months to deal with their change-in-life event, and those payments go to the back of the loan -- principal and interest," Mr. Bryant said at a recent Federal Deposit Insurance Corp. forum on mortgage lending to low- and moderate-income households. Wells Fargo Home Mortgage, Banco Popular, the Office of Thrift Supervision, and the Office of the Comptroller of the Currency have endorsed the council's recommendations. The report says responsible subprime lending has done more to help the poor out of poverty than anything else in the past 50 years, and that the subprime mortgage crisis is a result of irresponsible, predatory, and greed-based lending, not subprime lending itself.