The Federal Reserve Board is slated to meet Tuesday morning and approve the Basel III capital rules, which have been on hold for nearly a year due partially to the spreading criticism of the way single-family loans are treated.
The proposed rule released last spring did not recognize private mortgage insurance as a compensating factor in calculating the LTV ratios or risk weightings.
Conventional loans with loan-to-value ratios above 80% that currently have a 50% risk weight due to MI were pushed into a 75% or 100% risk weighting.
For nontraditional mortgages and home equity loans, the risk weightings ranged from 100% and 200% depending on the LTV ratio.
Critics of the
Small banks and thrifts are hoping they will be exempt from the new capital rules so they can continue to base their capital requirements under the current Basel I risked-based capital rule.
The Fed meeting is scheduled for July 2 at 9:30 a.m.
