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Joint Press Release

Office of the Comptroller of the Currency
Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
Office of Thrift Supervision
National Credit Union Administration

For Immediate Release

June 29, 2007

Federal Financial Regulatory Agencies Issue Final Statement on Subprime Mortgage
Lending
The federal financial regulatory agencies today issued a final Statement on Subprime
Mortgage Lending to address issues relating to certain adjustable-rate mortgage (ARM)
products that can cause payment shock.
The statement describes the prudent safety and soundness and consumer protection
standards that institutions should follow to ensure borrowers obtain loans they can afford to
repay. These standards include a fully indexed, fully amortized qualification for borrowers
and cautions on risk-layering features, including an expectation that stated income and
reduced documentation should be accepted only if there are documented mitigating factors
that clearly minimize the need for verification of a borrower's repayment capacity.
Consumer protection standards include clear and balanced product disclosures to customers
and limits on prepayment penalties that allow for a reasonable period of time, typically at
least 60 days, for customers to refinance prior to the expiration of the initial fixed interest
rate period without penalty.
The statement reinforces the April 17, 2007 interagency Statement on Working with
Borrowers (20 KB PDF), in which the agencies encouraged institutions to work
constructively with residential borrowers who are financially unable or reasonably expected
to be unable to meet their contractual payment obligations on their home loans. Workout
arrangements that are consistent with safe and sound lending practices are generally in the
long-term best interest of both the financial institution and the borrower.
The agencies published the proposed Statement on Subprime Mortgage Lending for
comment on March 8, 2007. Comments were received from financial institutions, trade
associations, consumer and community organizations, members of Congress, state and local
officials, and members of the public. The agencies made a number of changes to the
proposal to respond to commenters' concerns and to provide additional clarity.
The Statement on Subprime Mortgage Lending is attached.
###
Attachment (72 KB PDF)

Media Contacts:
Federal Reserve Deborah Lagomarsino
FDIC
David Barr
NCUA
Cherie Umbel
OCC
Kevin Mukri
OTS
Kevin Petrasic

(202) 452-2955
(202) 898-6992
(703) 518-6337
(202) 874-5770
(202) 906-6677

2007 Banking and consumer regulatory policy
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Last update: June 29, 2007