Academic journal article Federal Reserve Bulletin

Issuance of Guidance on Supervision of Subprime Lending

Academic journal article Federal Reserve Bulletin

Issuance of Guidance on Supervision of Subprime Lending

Article excerpt

The federal banking regulatory agencies on January 31, 2001, issued expanded guidance intended to strengthen the examination and supervision of institutions with significant subprime lending programs.

The guidance, issued by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision, supplements previous subprime lending guidance issued on March 1, 1999. It principally applies to institutions with subprime lending programs that equal or exceed 25 percent of the institution's tier 1 regulatory capital.

For purposes of this guidance, "subprime lending" refers to programs that target borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, or bankruptcies. Such programs may also target borrowers with questionable repayment capacity evidenced by low credit scores or high debt-burden ratios.

Major issues discussed in the guidance include the following:

* Allowance for loan and lease losses (ALLL). Analysis and documentation standards for the ALLL

* Capital adequacy. Factors to consider when determining the level of capital necessary to support subprime lending programs

* Loan review and classification. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.