WASHINGTON U.S. Bancorp is not planning to change its approach to mortgage lending despite efforts by regulators to reduce buyback risk and encourage lending to borrowers with lower credit scores and downpayments.
Richard Davis, the bank's chief executive, dismissed the proposed changes as a "good sound bite."
Davis said the bank will continue to originate Fannie Mae and Freddie Mac loans and sell them off.
"We will continue to do what we are doing now, which I think is sufficient for the near term," Davis said Wednesday during a conference call on the bank's third quarter earnings.
The CEO said it will take a while before he is convinced that it is safe to make loans to borrowers with lower downpayments and FICO scores. Until then, U.S. Bancorp will "stay on the sidelines," he said, due to concerns about compliance and litigation risk.
The Minneapolis-based bank took a $200 million expense in the third quarter to settle litigation claims by the Department of Justice over Federal Housing Administration loans
The CEO stressed that he is waiting for a private market to develop that will enable U.S. Bancorp to sell lesser quality loans to investors without guarantees.
"Once we see that appetite," Davis said, U.S. Bancorp might be willing to loosen its underwriting standards.