Yesterday, the Financial Stability Board (FSB) announced that it has launched a review of residential mortgage underwriting and origination practices. The FSB will survey existing practices among FSB members and intends to draw internationally applicable lessons from recent actions taken by national authorities. The survey is based on the following recommendations made by the January 2010 Joint Forum, Review of the Differentiated Nature and Scope of Financial Regulation:
- Mortgage originators should adopt minimum underwriting standards that are made available to all interested parties and accurately assess each borrower’s capacity to repay the obligation in a reasonable period of time.
- Mortgage providers of all types should be subject to consistent mortgage underwriting standards, regulatory oversight and enforcement.
- National policymakers should establish public disclosure of market-wide mortgage underwriting practices, and the FSB should establish a process to review underwriting practices and publish the results.