ACB: Press Releases

Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release May 16, 2001 #01-40
E-mail: [email protected]

ACB SUPPORTS REDUCTION IN CAPITAL REQUIREMENTS FOR CERTAIN MORTGAGE LOANS

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America’s Community Bankers has supported a proposal by the Office of Thrift Supervision to reduce the risk-based capital requirements on certain mortgage loans. In its comment letter, ACB suggested changes to provide additional benefits to savings associations.

ACB applauded OTS for proposing to reduce the capital charge for certain high loan-to-value-ratio loans to the 50 percent weighting category. Currently, home loans with LTVs above 80 percent are assigned to the 100 percent category. ACB noted that the proposed reduction would actually apply to LTVs of less than 90 percent and recommended including loans with 90 percent LTVs to conform with the threshold for a variety of loan programs.
ACB urged OTS to consider creating additional risk weightings between the current 50 percent and 100 percent levels based on lower LTVs. For example, ACB said a home loan with an LTV of 60 percent or less should qualify for a lower risk weighting to better reflect the true risk of a highly collateralized, appraised loan. ACB made similar recommendations for lower risk weightings for commercial and certain construction loans.
ACB recommended allowing lenders to reclassify loans to a lower risk weight based on principal amortization or prepayment and property improvements or market appreciation. Savings associations already revisit loan transactions with private mortgage insurance when the risk characteristics materially change, ACB said.

ACB’s Comment Letter is ATTACHED.

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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