NCUA's Johnson Warns On LoweringStandards In Mortgage Lending

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LAS VEGAS - (10/12/05) -- NCUA Chairman JoAnn Johnsonacknowledged credit union mortgage portfolios carry less risk thanother lenders, but said she and the agency are wary of a trendtoward allowing borrowers to use interest-only loans simply toqualify for higher-priced homes in some of the country's hotterreal estate markets. "(Across the financial services industryinstitutions) are relaxing standards just to qualify people for aloans," Johnson told the American Credit Union Mortgage Association(ACUMA) meeting here. " In California, in the first six months of2005, adjustable-rate loans accounted for 61% of mortgage loans. In2002, only 2% of mortgage loans were adjustable rate. That is acause for alarm." Johnson noted credit unions originate just 1.95%of all U.S. mortgage loans, but that growth cannot come at theexpense of safety and soundness.

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