On April 17, 2007, the Federal Reserve and the other federal financial institutions regulatory agencies issued the attached staff guidance to encourage supervised institutions to work constructively with homeowners who are financially unable to continue meeting their mortgage payments. Prudent workout arrangements that are consistent with safe and sound lending practices are generally in the long-term best interest of both the financial institution and the borrower.

Federal Reserve Banks are asked to distribute this letter and the accompanying statement to state member banks and bank holding companies and their non-bank subsidiaries, as well as to supervisory and examination staff. If you have any questions concerning the safety and soundness aspects of this guidance, please contact Brian Valenti at (202) 452-3575, Virginia Gibbs at (202) 452-2521, or Sabeth Siddique at (202) 452-3861 in the Board's Division of Banking Supervision and Regulation. For questions related to Community Reinvestment Act consideration and other consumer compliance issues, please contact Phyllis Harwell at (202) 452-3658 and Anjanette Kichline at (202) 785-6054 in the Board's Division of Consumer and Community Affairs.