OTS Chief Voices Underwriting Concerns

Office of Thrift Supervision examiners are continuing to see deterioration in underwriting standards as margins and loan volume decline at federally chartered thrifts, according to OTS Director John Reich."Examiners are digging deeper into loan portfolios to understand the risks institutions are assuming, and they are paying close attention to loan documentation, pricing, loan-to-value ratios, and underwriting standards," Mr. Reich told the New York Bankers Association. He said loan pricing is out of line with credit risk. Thrifts are liberalizing underwriting standards to maintain loan volume, he said. And examiners have identified institutions purchasing loan pools without adequate loan documentation. "Finally, there continues to be excessive dependence on wholesale funding by a number of institutions," the OTS director said.