OCC Warns of Easing Underwriting Standards

National banks are continuing to ease their underwriting standards on home loans when they should be tightening, according to Comptroller of the Currency John Dugan.With the red-hot housing market cooling, "we would normally expect" lenders to tighten their underwriting standards and require borrowers to provide more equity, Mr. Dugan told the American Bankers Association annual convention. However, examiners from the Office of the Comptroller of the Currency are finding that bankers, giving in to competitive pressures, are easing underwriting standards. The comptroller reported that the OCC's 2006 underwriting survey, which is due to be released soon, shows a significant easing in residential mortgage standards. "We saw more of what we observed the previous year: longer interest-only periods, more piggybank loans to avoid mortgage insurance requirements, higher allowable debt-to-income and loan-to-value ratios, and greater volumes of loans with reduced documentation requirements," he said. The OCC can be found on the Web at http://www.occ.treas.gov.

For reprint and licensing requests for this article, click here.
Originations Law and regulation
MORE FROM NATIONAL MORTGAGE NEWS