Regulatory Alerts2007-08-29
CSBS-AARMR Guidance on Nontraditional Mortgage Product Risks
The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators issued this guidance to establish parallel regulatory standards for non-depository mortgage providers regarding nontraditional mortgage products. The document requires providers to implement robust underwriting standards that account for payment shock and negative amortization, while strictly managing risks associated with reduced documentation and simultaneous second-lien loans. Additionally, it mandates enhanced risk management practices and clear consumer disclosures to ensure borrowers fully understand the potential financial risks before entering into these complex loan agreements.
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