District Circular Letters
October 27, 1999
BANKING SUPERVISION AND REGULATION:
INHERENT RISK ON HIGH LOAN-TO-VALUE (LTV) RESIDENTIAL REAL ESTATE
LENDING
To State Member Banks,
Bank Holding Companies, and
Others Concerned in the Twelfth Federal Reserve District
The Federal Reserve, along with the other federal banking agencies, has
recently issued additional guidance on high loan-to-value (LTV) residential
real estate loans. The press release and interagency statement, which
are attached, clarify the agencies' real estate lending guidelines, adopted
in 1992, with respect to residential real estate loans. (See our letter
of March 31, 1993).
The guidance is intended to remind financial institutions of their obligations
to effectively manage the risks in their high LTV loan portfolios and
to comply with fair lending and consumer protection laws and regulations.
The Federal Reserve previously issued guidance on home equity lending
and high LTV residential loans in May 1995. The new interagency statement
builds on that earlier guidance and provides further discussion of the
risks that high LTV loans may pose to banks. The interagency statement
also provides clarification of two of the exemptions from the standards:
(1) the "abundance of caution" exemption and (2) the exemption regarding
loans sold promptly without recourse.
Copies
Copies of this interagency statement are available from our Corporate
Services Department. To request copies to be sent via mail, please call
(415) 974-2748. To request copies to be sent via fax,
please call (415) 974-3333, and specify document number
4122. They are also available via the Federal Reserve
Bank of San Francisco's Internet site.
For Further Information
For additional information regarding this matter, please contact the
Banking Supervision and Regulation Department at (415) 974-2128.
FEDERAL RESERVE BANK OF SAN FRANCISCO
Attachments
(Note: Referenced attachments are not available electronically.)
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