The
Office of the Comptroller of the Currency, which oversees national banks, has
issued residential real estate lending standards as an additional step to
protect against national banks becoming involved in predatory, abusive, unfair
or deceptive residential mortgage lending practices.
"The
OCC is committed to ensuring that abusive lending practices do not gain a
foothold in the national banking system," said Julie L. Williams, acting
Comptroller of the Currency.
The new
guidelines incorporate key provisions and central principles of the OCC's
February, 2003 advisory letters alerting national banks to practices that may
be considered predatory or abusive and advising national banks on measures to
avoid such practices. The advisories addressed national banks' mortgage
origination activity, as well as purchases of loans and use of third-party
brokers to conduct mortgage lending. National banks are expected to implement
anti-predatory lending standards consistent with and appropriate to the size
and complexity of the bank and the nature and size of its lending
activities.
In
January 2004, the OCC added a regulatory prohibition on making mortgage loans
based predominantly on the bank's realization of foreclosure or liquidation
value of the collateral, without regard to the borrower's ability to repay the
loan according to its terms – a prohibition that addresses a central
characteristic of predatory lending. In that same rulemaking, the OCC also
added provisions prohibiting banks from engaging in unfair or deceptive
practices under the Federal Trade Commission Act.
The new
guidelines for residential mortgage lending standards describe particular
practices that are inconsistent with sound mortgage lending practices. They
describe other practices that may be conducive to abusive lending, depending on
the circumstances, and which, accordingly, warrant a heightened degree of care
by bankers.
"The
guidelines focus on the substance of a bank's activities and practices,"
said acting Comptroller Williams, "not on the creation of another set of
bank policies."
The
standards described in the guidelines are enforceable pursuant to section 39 of
the Federal Deposit Insurance Act and the implementing process set forth in
part 30 of the OCC's regulations. If the OCC believes a bank's practices fail
to meet the standards in the guidelines, the OCC may require submission of a
corrective plan by the bank. If the national bank fails to submit a plan, or to
comply with it, the OCC may issue a cease and desist order against the bank.
Orders are formal, public documents, and they may be enforced in district court
or through the assessment of civil money penalties.
The
guidelines take effect 60 days after their publication in the Federal Register.
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