DFI Adopts CSBS/AARMR/NACCA Guidance on Subprime Mortgage Lending
Date: July 20, 2007
To: Consumer Loan Licensees, Mortgage Broker Licensees, and Exempt Mortgage Brokers Subject to the Authority of RCW 19.146
From: Deb Bortner, Director of Consumer Services
Re: Regulatory Guidance on Subprime Mortgage Lending
Attachment: View the CSBS/AARMR/NACCA Statement on Subprime Mortgage Lending (PDF)*
On June 29, 2007, the federal financial regulators publicly released the Statement on Subprime Mortgage Lending. The interagency Subprime Statement was developed to address emerging risks associated with certain subprime mortgage products and lending practices. The interagency Subprime Statement, however, applies only to insured financial institutions and their affiliates, and does not apply to subprime loan originations of independent mortgage lenders and mortgage brokers. In order to promote consistent underwriting and consumer protection standards in the residential mortgage industry, the Conference of State Bank Supervisors (CSBS), the American Association of Residential Mortgage Regulators (AARMR), and the National Association of Consumer Credit Administrators (NACCA) have developed a parallel Statement on Subprime Mortgage Lending that applies to state-supervised mortgage lenders and brokers.
The Department of Financial Institutions has adopted the CSBS/AARMR/NACCA guidance as an additional tool in determining whether a lender or mortgage broker is in compliance with the statutory prohibited practice section of the Consumer Loan Act and the Mortgage Broker Practices Act. The guidance is intended to promote consistent regulation in the mortgage market and to clarify how residential mortgage providers can offer subprime products in a way that clearly discloses the risks borrowers may assume. Licensees can expect Department examiners to employ the guidance when reviewing a lender or mortgage broker’s loans for compliance with state laws and regulations.
These guidelines are designed to level the playing field in the mortgage market in order to protect consumers from taking on high-risk mortgages without having a full understanding of the terms of such loans. You are strongly encouraged to consider the guidance as a minimum standard or benchmark for compliance when soliciting, originating or making subprime loans.
Please provide a copy of this letter to all of your branch managers in Washington. If you have any comments or questions, please contact Deborah Bortner, Director of Consumer Services, at (360) 902-0511.* This document is a PDF file, and you will need Adobe Acrobat Reader to view it. If you don't already have Acrobat Reader installed on your computer, you may download it for free from Adobe.
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