FSB is consulting on its draft Principles for Sound Residential Mortgage Underwriting Practices. It notes many countries have encouraged stricter mortgage underwriting processes in the wake of the financial crisis and thinks internationally agreed principles would help supervisors better to monitor and detect risks in underwriting practices. The principles cover:

  • effective verification of income and other financial information;
  • reasonable debt service coverage;
  • appropriate loan-to-value ratios;
  • effective collateral management;
  • prudent use of mortgage insurance;
  • an implementation framework; and
  • effective supervisory tools and powers.

FSB asks for comment by 9 December and plans to release the final set of principles in early 2012. (Source: FSB Consults on Mortgage Underwriting Principles)