Thematic Review of Mortgage Underwriting and Origination Practices
This peer review did not have the benefit of international standards or best practices to act as a benchmark, and instead provides a comprehensive picture of existing practices and oversight – including recent crisis-induced reforms – and where applicable, identifies sound practices. As the global crisis showed, the consequences of weak underwriting practices in one country can be transferred globally through securitisation of mortgages underwritten to weak standards. Thus, it is important to have sound residential mortgage underwriting practices at the point at which a mortgage loan is originally made. The review finds that overall, national authorities are making good progress in promoting consistent and effective underwriting standards for residential mortgage origination. As a result, industry practices are moving in the right direction. The degree of change in each FSB jurisdiction reflects their specific characteristics and initial starting positions. Although concerns have been expressed in various quarters over gaps in the regulation of residential mortgage lending practices, the peer review found that nearly all mortgage lenders across the FSB membership are prudentially regulated, conduct-regulated by consumer protection authorities, or in some cases both.