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Financial Institution Letters

Best Practices from the FDIC'S Forum on Mortgage
Lending for Low- and Moderate-Income Households
September 4, 2008

Summary: The FDIC is issuing the attached document to highlight best practices that were discussed at the FDIC's July 8, 2008, Forum on Mortgage Lending for Low- and Moderate-Income (LMI) Households. The purpose of the forum was to explore a framework for LMI mortgage lending in the future, in light of current problems in the mortgage market. The forum examined ways to encourage profitable, responsible and sustainable mortgage lending to lower-income households and strategies to rejuvenate the secondary market for these loans.

The best practices listed below and in the attached document are not intended as supervisory guidance, but are being provided to banks for informational purposes as a summary of issues discussed at the forum. Banks are encouraged to review and consider the best practices in the context of their LMI mortgage lending programs.

  • Back-to-Basics Underwriting - Basic, traditionally underwritten, 30-year fixed-rate mortgages are the most suitable mortgages for most LMI borrowers.
  • Incentives/Compensation - Ensuring that all parties to mortgage transactions have a long-term stake in the outcome of the transactions will improve the quality of LMI mortgages.
  • Transparency and Due Diligence - Improved transparency throughout the mortgage process is critical to reviving the secondary market for LMI mortgages.
  • Expanding Existing Products and Innovations - A variety of existing and proposed products and processes may increase availability of LMI mortgage credit, including extending amortization schedules, expanding alternative underwriting processes for consumers with limited credit history, and creating innovative insurance products to address temporary income disruptions, among other things.
  • Public/Private Partnerships - Partnerships with community organizations, nonprofit corporations, banks, borrowers, local government, and others facilitate credit enhancements and home ownership counseling that make responsible LMI mortgage lending possible.

FDIC-Insured Institutions (Commercial and Savings)

Suggested Routing:
Chief Executive Officer
Chief Loan Officer
Chief Compliance Officer
Board of Directors

Best Practices from the FDIC's Forum on Mortgage Lending for Low- and Moderate-Income Households
Best Practices from the FDIC's Forum on Mortgage Lending for Low- and Moderate-Income Households (PDF Help)

Special Advisor Rae-Ann Miller at
or 202-898-3898

Printable Format:
FIL-88-2008 (PDF Help)

FDIC financial institution letters (FILs) may be accessed from the FDIC's Web site at

To receive FILs electronically, please visit

Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information Center, 3501 Fairfax Drive, E-1002, Arlington, VA 22226 (1-877-275-3342 or 703-562- 2200).

Last Updated 9/4/2008

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