- The FDIC, CSBS and AARMR encourage supervised institutions to apply loss mitigation techniques
that will achieve long-term, sustainable obligations to provide stability to borrowers,
investors and the marketplace.
- In developing the appropriate loss mitigation strategy for individual borrowers, it is essential
to consider the borrower's ability to repay the modified obligation.
- As noted in the interagency Statement, one methodology commonly used by servicers is an analysis
of the borrower's resulting debt-to-income ratio. The DTI ratio should include the customer's
total monthly housing- related payments (e.g., principal, interest, taxes and insurance, or what
is commonly known as "PITI") as a percentage of the borrower's gross monthly income. Attention
should also be given to the borrower's other obligations and resources, as well as additional
factors that could affect the borrower's capacity to repay.
- In applying the DTI ratio to evaluate the borrower's ability to repay the modified obligation,
the FDIC, CSBS and AARMR note that, absent mitigating circumstances, resulting DTI ratios
exceeding 50 percent will increase the likelihood of future difficulties in repayment and
delinquencies or defaults.
FDIC-Supervised Banks (Commercial and Savings)
Chief Executive Officer
Chief Loan Officer
Chief Compliance Officer
Nontraditional Mortgage Product Risks
Subprime Mortgage Lending
Workout Arrangements for Residential Borrowers
Securitized Subprime Residential Mortgage Loans
Implications of Restructuring Certain Securitized
Residential Mortgage Loans
Loss Mitigation Strategies
Examination Specialist Beverlea S. Gardner at
BGardner@FDIC.gov or (202) 898-3640 or
Senior Capital Markets Specialist Suzanne L. Clair
at SClair@FDIC.gov or (202) 898-6605
FIL-77-2007 - PDF (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 via the FDIC's Public Information
Center (1-877-275-3342 or 703-562-2200).