Responsible Lending Policies
May 2 , 2006
Board Acts to Strengthen Responsible Lending Policies
The Federal Home Loan Bank of New York (“FHLBNY”) promotes the expansion of fair and equitable home ownership opportunities. Through the unique partnership with our member lenders we are privileged in serving as a liquidity provider in support of their community lending activity. This is accomplished largely through the offering of advances and through other credit programs including issuing letters of credit and purchasing eligible mortgages.
An integral element of this partnership is a shared commitment to sound and responsible lending practices for all qualifying individuals seeking home financing opportunities.
The Board of Directors of the FHLBNY has recently approved enhancements that serve to strengthen the Responsible Lending policies (“APL Policies”) that were first established early in 2003. Formal APL Policies have now been separately established for collateral supporting advances (APL Policy for Collateral) and for mortgages purchased under the Mortgage Partnership Finance® (“MPF®”) Program (APL Policy for Acquired Member Assets).
Under the APL Policies, eligible mortgage loans used as collateral supporting advances or sold into the MPF® Program must comply with all applicable Responsible Lending laws. Additionally, the FHLBNY has established a firm policy prohibiting the eligibility of any residential mortgage loan with the following predatory or potentially predatory characteristics:
- Requiring the borrower to obtain prepaid, single-premium credit life, credit disability, credit unemployment, or other similar credit insurance;
- Charging prepayment penalties for early payoff beyond the first five years of the loan (or shorter time frame if further restricted by state statutes or ordinances of local jurisdictions);
- Inclusion of mandatory arbitration clauses with respect to dispute resolution, to the extent that such requirements are prohibited or limited by applicable Responsible Lending Laws;
- Mortgages subject to the Home Ownership and Equity Protection Act and “high cost” or high rate” loans, or loans in similar categories, as such terms may be defined in Federal laws or the statutes or ordinances of various states or local jurisdictions
In addition, when a rating agency determines that it cannot rate a structured finance transaction that includes particular mortgages due to the potential liability under Responsible Lending Laws, then such mortgages are not eligible for sale into the MPF® Program.
Members are responsible for ensuring that all residential mortgage loans originated, either internally or through contracted third-party originators, as well as all loans purchased from external sources, comply with the provisions of the FHLBNY’s APL Policies.
The FHLBNY will take reasonable steps to verify compliance with this policy, including but not limited to the following: 1) review Member regulator exam reports for findings pertaining to unfair and/or abusive lending practices; 2) monitor Member regulator alerts for newly issued supervisory agreements, memoranda of understanding, or cease and desist orders pertaining to unfair and/or abusive lending practices; 3) during the normal course of on-site collateral reviews, review loan documentation for compliance with provisions of this policy; and 4) conduct pre-and post purchase due diligence reviews of loans sold into the MPF® Program.
These enhanced policies are intended to underscore the FHLBNY’s support of fair lending practices through clear communication of what will constitute eligible residential mortgage loans for pledging as collateral or for sale into the MPF® Program. The policies can be accessed through our website, www.fhlbny.com under the About Us tab.
If you have questions regarding the APL Policies please contact the following individuals:
APL Policy for Collateral: | Paul Héroux, SVP Member Services |
APL Policy for Acquire Member Assets: | Tom Doyle, VP Acquired Member Assets |