U.S. Comptroller Encourages States to Adopt Standards Similar to Federal Guidance
According to Market Watch, the U.S. Comptroller of the Currency John Dugan, said that all banks and mortgages originators should use caution when offering exotic loans such as payment-deferral products to home buyers, not just federally regulated ones.
It is now less than one month after federal regulators warned banks about making sure borrowers can pay the full amount of what they borrow, and that homeowners are aware of all of the terms of their mortgage. However, this government guidance does not apply to some state-regulated lenders. According to Dugan, the guidance should apply to state-regulated lenders. Dugan has urged state regulators to adopt similar standards to the federal guidance, aiming to protect borrows from exotic mortgage loan risks.
According to Dugan, many state-regulated mortgage companies do not have contact with federally regulated institutions. Regulators are not asking lenders to stop offering exotic mortgages such as interest-only loans. However, they are trying to educated mortgage loan customers about the risks associates with the different products and terms being offered such as payment increases.
Dugan believes that it is essentials for state regulators to adopt similar standards to address such risks.