On July 17, the Board of Governors of the Federal Reserve System, the Office of Thrift Supervision, the Federal Trade Commission, the Conference of State Bank Supervisors, and the American Association of Residential Mortgage Regulators announced their cooperation with respect to a pilot project to conduct “targeted consumer-protection compliance reviews of selected non-depository lenders with significant subprime mortgage operations.” The focus will be on non-depository subsidiaries of bank and thrift holding companies as well as mortgage brokers doing business with, or working for, these entities. Pursuant to the program, state supervisors will also conduct coordinated examinations of independent state-licensed subprime lenders and their associated mortgage brokers.

As part of the program, the agencies will “evaluate the companies’ underwriting standards, as well as senior management oversight of the risk-management practices used for ensuring compliance with state and federal consumer protection regulations and laws.” Also, as part of the program, the agencies will share information from their reviews and investigations, “take action as appropriate, collaborate on the lessons learned, and seek ways to better cooperate in ensuring effective and consistent reviews of these institutions.”

The target date for implementation is the fourth quarter of this year. At the conclusion of the pilot, the agencies will determine whether the program should be continued.