FSB has published a set of principles for “Sound Residential Mortgage Underwriting”. The principles address five areas which were particularly weak during the financial crisis:
- effective verification of income and financial information;
- reasonable debt service coverage;
- appropriate loan-to-value ratios;
- effective collateral management; and
- prudent use of mortgage insurance.
The Principles also include an implementation framework and set out guidance on effective supervisory tools and powers. (Source: FSB Publishes Principles for Residential Mortgage Underwriting)