Financial Stability Board (FSB) invites feedback on residential mortgage underwriting practices

The Financial Stability Board (FSB) has launched a review of residential mortgage underwriting and origination practices. Problems arising from poorly underwritten residential mortgages contributed significantly to the global financial crisis that began in 2007. The review will survey existing practices across the FSB membership, including recent actions taken by national authorities to promote sound practices, and draw internationally applicable lessons.

The review will be based on the recommendations made by the Joint Forum in its January 2010 Review of the Differentiated Nature and Scope of Financial Regulation. The Joint Forum focused on two fundamental areas of concern in the residential mortgage market: poor underwriting practices and the lack of consistent supervisory and regulatory regimes for similar activities and products.

As part of this review, FSB welcome feedback from financial institutions, industry associations, consumer groups and other stakeholders on their experiences regarding residential mortgage underwriting practices, either in a particular country or across several countries. This could include comments on:
• gaps in regulatory and supervisory oversight;
• areas where regulations or guidance from different agencies might overlap;
• current or best practices for measuring a borrower’s ability and willingness to repay;
• how market practices have evolved in recent years; and
• challenges faced by underwriters or originators that operate in several countries.

Feedback should be submitted by 25 October 2010 to under the subject heading “FSB Thematic Peer Review on Mortgage Underwriting Practices.” The review will be completed and published in early 2011. Individual submissions will not be made public.

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