A call for documentation
WASHINGTON, DC – In early January, US regulators issued new guidance on non-traditional mortgage products, warning banks to develop written policies that specify acceptable product attributes, production and portfolio limits, sales and securitisation practices, and risk management expectations.
The institutions' policies for non-traditional mortgage lending activity should set forth acceptable levels of risk through its operating practices, accounting procedures and policy exception tolerances. The policies should reflect appropriate limits on risk layering and should include risk management tools for risk mitigation purposes.
Non-traditional mortgage products include 'interest-only' mortgage loans where a borrower pays no principal for the first few years of the loan, and 'payment
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