Regulatory Alerts2007-07-01
Added · Updated
Final: Regulation 2107/2208 Guidance On Nontraditional Mortgage Product Risks
The State Bank Commissioner adopts Regulation 2107/2208, effective July 11, 2007, to establish risk management and consumer protection standards for nontraditional mortgage products offered by mortgage brokers and companies not affiliated with bank holding companies or insured financial institutions. The regulation requires providers to implement prudent underwriting standards that account for payment shock and negative amortization, verify borrower repayment capacity, and manage risks associated with reduced documentation and simultaneous second-lien loans. Providers must also adopt robust risk management practices, including written policies, enhanced monitoring, and quality controls, while ensuring consumers receive clear and balanced information regarding product risks before making loan decisions.