American Association of Residential Mortgage Regulators
1255 23rd Street, NW, Suite 200, Washington, DC 20037

WASHINGTON D.C. — The American Association of Residential Mortgage Regulators (AARMR) and the Conference of State Bank Supervisors (CSBS) today issued model guidelines for use by state mortgage regulators for the examination of lenders and brokers that offer subprime and non-traditional mortgage loans to consumers

The model guidelines will enhance consumer protection by providing state regulators with a uniform set of examination tools for conducting examinations under both the Nontraditional Mortgage Product Risks Guidance (Guidance) released in 2006 and the Subprime Statement (Statement) released earlier this month.  A number of states have already identified they will use the guidelines in upcoming examinations of state-licensed lenders.

The release of the guidelines is the latest step by state regulators to address recent problems in the subprime lending industry.  The guidelines were developed to:

• Protect consumers by providing comprehensive examination procedures that states can use to determine compliance with the Guidance and Statement.
• Establish uniform standards applicable for multi-state examinations and enforcement actions or for review by one state of another state’s report of examination.
• Provide consistent and uniform guidelines for use by lender and broker in-house compliance and audit departments.

"This project is a continuation of the States’ serious focus on recent events in the mortgage industry.  A uniform set of examination standards specifically aimed at riskier lending is one of the primary components of our regulatory platform,” said Jeff Vogel, Wyoming State Bank Commissioner and current Chairman of CSBS.

In the past year, state regulators have followed federal bank regulators and adopted the Guidance and the Subprime Statement.  Earlier this month, state regulators also announced a joint pilot project with the Federal Reserve and the Office of Thrift Supervision to collaboratively examine lenders where there is joint oversight.

“These guidelines should help state regulators put the recent regulatory guidance and subprime statement into action to protect consumers,” said Mark Pearce, Deputy Commissioner of Banking for North Carolina, AARMR Board Director and the task force leader on the guidelines project.  .

State regulators are publishing the full guidelines in order to enable the industry to use the guidelines to develop compliance systems.  “Mortgage lenders and brokers will know what states expect for non-traditional and subprime loans that have caused foreclosure problems across the country,” added Pearce.

In coming weeks, CSBS will conduct nation-wide training for examiners in the state system to ensure uniformity and consistency in the approach to these complex products.

The Model Examination Guidelines are available for electronic download at CSBS  http://www.csbs.org  and AARMR (www.aarmr.org) websites.