TO THE OFFICER IN CHARGE OF
SUPERVISION AND APPROPRIATE SUPERVISORY AND EXAMINATION
STAFF AT EACH FEDERAL RESERVE BANK AND BANKING ORGANIZATIONS
SUPERVISED BY THE FEDERAL RESERVE
SUBJECT: Interagency
Credit Risk Management Guidance for Home Equity Lending
The Federal Reserve and the other federal financial
institutions regulatory agencies have issued the
attached interagency guidance to promote sound risk
management practices at financial institutions with
home equity lending programs. While delinquency and
loss rates for home equity loans and lines have historically
been low, the agencies have observed a rapid growth
in home equity lending activity, involving products
with higher embedded risk. At the same time, the
agencies have noted an easing of underwriting standards.
This guidance is intended to highlight the sound
risk management practices that an institution should
follow to keep pace with the growth and risk in its
home equity portfolio. Further, this guidance should
be considered in the context of existing regulations
and guidelines that are listed as cross references
at the end of this letter.
Federal Reserve Banks are asked to distribute this
letter and the interagency guidance to banking organizations
supervised by the Federal Reserve, as well as to
their supervisory and examination staff. If you have
any questions concerning this guidance, please contact
Sabeth Siddique, Manager, Credit Risk Section, at
(202) 452-3861 or Virginia Gibbs, Senior Supervisory
Financial Analyst, at (202) 452-2521.
Richard Spillenkothen
Director
- Attachment:
- Credit Risk Management Guidance for
Home Equity Lending (783 KB PDF)
- Cross References:
- Real Estate lending Standards Regulation
and Interagency Guidelines for Real Estate Lending
Policies (12 CFR 208.51
and Appendix)
Interagency Guidance on High Loan-to-Value Residential
Real Estate Lending (SR letter 99-26)
Regulation Z – Truth in Lending (12 CFR 226)
Interagency Guidelines Establishing Standards
for Safety and Soundness (12 CFR 208,
Appendix D-1)
Appraisal Regulations (12 CFR 208
subpart E and 12 CFR 225
subpart G)
Interagency Appraisal and Evaluation Guidelines
(SR letter 94-55)
Risk-Based Capital Guidelines (12 CFR 208,
Appendix A,III.D.4. and 12 CFR 225,
Appendix A,III.D.4.)
Interagency Questions and Answers on Capital Treatment
of Recourse, Direct Credit Substitutes, and Residual
Interests in Asset Securitizations (SR letter 02-16)
Interagency Expanded Guidance for Subprime Lending
Programs (SR letter 01-4)
FFIEC Uniform Retail Credit Classification and
Account Management Policy (SR letter 00-8)
Risk Management and Capital Adequacy of Exposures
Arising from Secondary Market Credit Activities
(SR letter 97-21)
