The Federal Deposit Insurance Corp. provided tips Thursday to institutions that are trying to expand mortgage credit options for low- and moderate-income borrowers.
As lending standards have tightened and subprime and alternative-A originations have all but vanished, new loans for lower-income families have become scarcer. In July the FDIC hosted a conference with regulatory and industry leaders to explore ways to rejuvenate the market.
On Thursday the agency put out a "best practices" document to encapsulate the ideas discussed at the forum.
The document, which is not intended as guidance, recommended a "back-to-basics" approach to loan underwriting, including a return to full documentation and to fixed-rate loans underwritten in a traditional way.
The FDIC also advocated doing away with no-down-payment loans. It recommended increased transparency in the secondary market for lower-income mortgages, as well as the expansion of products that have traditionally worked, such as loans with extended amortization periods.
"Longer amortization schedules such as 40-year, fixed-rate mortgages may be suitable for" low- and moderate-income "borrowers who live in areas with high-cost homes and/or need more affordable payments," the agency said in the document.
The entire document can be viewed here.