WASHINGTON — NCUA, together with the other federal financial institutions regulators, issued a final statement on subprime mortgage lending addressing emerging risks and outlining practices related to subprime adjustable rate mortgages that can cause "payment shock."
In Letter to Credit Unions 07-CU-09, NCUA wrote, "Credit unions should be aware that whether or not they are actively participating in subprime mortgage lending, some members may have received these types of loans at other institutions. Asset quality could be negatively impacted as some members struggle to repay considerably higher mortgage payments."
The final joint statement–which addresses guarding against predatory practices, assessing a borrower's capacity for repayment at the fully indexed rate, and underwriting loans based on stated income or reduced documentation–was attached.
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