Is there a list of subjects that credit unions must consider for inclusion in their policies and procedures?
Yes, the guidance requires all financial institutions, including credit unions, to focus on the following subjects and apply the relevant ones to their existing policies and procedures: • Help borrowers understand ARM risks, including: – Low initial payment; – High or unlimited reset rate caps; – Low or no documentation loans; – Problems of frequent refinancing; – Risk layering; – Simultaneous second lien loans; – Prepayment penalties; – NCUA prohibited practices. • Understand portfolio and risk management practices, including: – Relationship between subprime lending and predatory lending; – Risks of loans based on foreclosed or liquidation value; – Problem of loan “flipping”; – Fraud detection; – Use of qualifying standards; – Maintenance of appropriate capital levels; – Use of appropriate allowance for loan and lease loss levels; – Risks of stated income loans. • Underwriting standards. • Workout arrangements. • Consumer protection principles, including: – Use of a summary disclosure
