Principles for Sound Residential Mortgage Underwriting Principles
In March 2011 the FSB published a thematic review of residential mortgage underwriting and origination practices. Based on the findings of the review, six recommendations were set out, one of which asked the FSB to develop an international principles-based framework for sound underwriting practices. After providing sufficient time for implementation, the FSB will conduct a follow-up review to assess progress made in implementing the framework. Given that the underlying risks can differ across jurisdictions, the Principles are high-level rather than aimed at detailed international standards. As the global crisis demonstrated, the consequences of weak residential mortgage underwriting practices in one country can be transferred globally through securitisation of mortgages underwritten to weak standards. As such, it is important to have sound underwriting practices at the point at which a mortgage loan is originally made.
To help inform the final internationally agreed principles, the FSB welcomes comments on the consultative document. Responses should be sent to email@example.com by Friday 9 December 2011. The final set of principles will be released in early 2012.