WASHINGTON -- Three banking trade groups are urging federal regulators to scrap a proposal, still on the drawing board, to set rigid lending standards for real estate.

The proposal to establish maximums for loan-to-value ratios is inflexible and would discourage financial institutions from lending on real estate, the American Bankers Association, the Association of Bank Holding Companies, and the Savings and Community Bankers Association said in a joint letter.

"The law gives regulators discretion," said Richard Whiting, general counsel of the holding company group. "We're asking them to use it in a way that gives bankers the benefit of the doubt."

Wide Circulation

The letter was sent late Wednesday to the Federal Reserve Board, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the Office of Thrift Supervision.

The 1991 banking bill directed the agencies to adopt uniform real estate lending standards, but left it up to the regulators to decide on the framework.

Hard-and-Fast Ratios

Two approaches are under consideration. One, developed by an advisory panel to the interagency Federal Financial Institutions Examination Council, would set hard-and-fast loan-to-value ratios, ranging from 50% to 60% for land loans to 95% for single-family mortgage loans.

The other approach, which the banking groups endorsed, would allow examiners to establish loan-to-value ratios institution by institution.

The Federal Reserve Board recently discussed the loan-to-value limits at a public board meeting, but hasn't issued a proposed rule yet. The other agencies are considering the measure.

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