Today, the FDIC issued a Financial Institution Letter on the “Classification Treatment for High Loan-to-Value (LTV) Residential Refinance Loans.” In the letter, the FDIC stated that loans to refinance performing real estate mortgages at lower rates should not receive adverse classification despite higher LTV ratios. Instead, retail loan classification should be based on whether the credit complies with sound underwriting standards. The FDIC also affirmed the standards for the classification treatment for high LTV residential refinance loans outlined in the "Uniform Retail Credit Classification and Account Management Policy." The letter also articulated the FDIC's belief that interest rate reductions for performing borrowers “generally strengthen the borrowers’ repayment ability.”