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HELOC Growth Worries OCC.(Office of the Comptroller of the Currency )
Washington -- Federal banking regulators are getting nervous about the "extraordinary" growth of home-equity lending at a time when interest rates are starting to rise and home price appreciation is expected to slow.
The Office of the Comptroller of the Currency is concerned that national banks are easing their underwriting standards due to competitive pressures in the industry.
This easing is evident in home-equity lines of credit and first mortgage loans, such as "interest only" loans, acting comptroller of the currency Julie Williams told a Bank Administration Institution meeting in New York.
"We have stressed that active portfolio management is especially important for lenders who have experienced or project significant growth, particularly in higher-risk products such as higher LTV loans, limited or 'no doc' loans, prolonged interest-only products and loans generated by third parties," she said. (Third parties generally refer to mortgage brokers.)
OCC is planning to issue guidance on managing risk on these home-equity loans soon. OCC also is concerned about the rapid growth of HELOCs, particularly when these lines of credit are extended to borrowers with interest-only and no-doc loans.
"Today, delinquency and loss rates for home-equity loans and HELOCs are low, but we have concerns that rapid growth, historically low interest rates, and changes in the structure of home-equity products could mask embedded credit risk in these portfolios," the acting comptroller said.
"The comptroller is not against these loan products," an OCC spokesman said. But she wants national banks to review their ...
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Source: HighBeam Research, HELOC Growth Worries OCC.(Office of the Comptroller of the Currency )