Many Call for Tighter Subprime Underwriting Guidelines

AARP, AFL-CIO, Consumer Federation of America, Center for Responsible Lending, along with scores of community activist, civil rights and religious groups are urging federal and state banking regulators to tighten underwriting standards on subprime 2/28 ARMs and protect consumers and minorities from payment shock and foreclosures.In a letter, the 80 diverse groups call on the regulators to extend the nontraditional mortgage guidance to subprime 2/28 adjustable-rate mortgages so those loans are unwritten at the fully indexed rate. "We remain concerned that millions of high-risk, unaffordable loans are not covered by the guidance and that massive payment shock built into these loans could cause a foreclosure crisis that eclipses the displacements caused by Hurricane Katrina," the Feb. 21 letter said.