Memorandum
DATE: July 30, 2007
TO: Federal Home Loan Bank of New York Members
FROM: Paul B. Héroux
Head of Member Services
RE: Responsible Lending Policies
In response to the growing concern over past lending practices within the subprime sector, and the extensive use of nontraditional mortgage products that are now proving to be unsuitable for many borrowers, the Federal Home Loan Bank of New York (“FHLBNY”) has established a Responsible Lending Policy. This policy establishes the FHLBNY’s support for appropriate and responsible lending that meets the diverse credit needs of the marketplace that our members serve.
On April 12, 2007, the FHFB issued Advisory Bulletin 2007-AB-01 on Nontraditional and Subprime Residential Mortgage Loans that required the HLBs to undertake a review of credit risk management policies and practices. In conjunction with the FHLBNY policies covering Anti-Predatory Lending for Collateral (May 2006) and Anti-Predatory Lending for Acquired Member Assets (May 2006), the Board of Directors approved the Responsible Lending Policy (June 2007) to underscore FHLBNY’s support of fair lending practices.
The availability of diverse residential mortgage loan products, including those with non traditional characteristics or extended to non-prime borrowers, has created more opportunities for a wider range of borrowers to purchase a home. Most of these alternative mortgage products are, by themselves, not considered undesirable, but rather it is the unsuitability of these products for certain borrowers that may create undesirable results for both the borrower and the lender.
The FHLBNY supports the expansion of fair, equitable, affordable and accessible home ownership opportunities through the broad based community lending activities of its member lenders. We advocate flexible lending practices that are designed to responsibly service borrowers and enhance credit access for both prime and non-prime borrowers, including those with long term affordability credit needs. Providing accessible and affordable credit to borrowers at varying economic levels and life stages is a critical contributor to the overall success of all communities.
These policies may be found under the ‘About Us’ tab. If you have questions regarding the Responsible Lending Policy, please contact Paul Héroux, SVP Member Services at (212) 441-6808.