NCUA and other regulators issued guidance that promotes sound risk management practices for home equity lines of credit and loans. The agencies identified risk factors that, along with vulnerability to interest rate increases, have attracted scrutiny.

These include:

* Interest-only features that require no amortization of principal for a protracted period;

* Limited or no documentation of a borrower's assets, employment and income;

* Higher loan-to-value and debt-to-income ratios;

* Lower credit risk scores for underwriting home equity loans;

* Greater use of automated valuation models and other collateral evaluation tools for the development of appraisals and evaluations; and

* An increased number of transactions generated through a loan broker or other third party.

Regulatory Advocacy

http://www.cuna.org/reg_advocacy

Copyright Credit Union National Association, Inc. May 23, 2005
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