Agencies Issue Updated Leveraged Lending Guidance

Federal bank regulatory agencies released updated supervisory guidance on leveraged lending. The guidance covers transactions characterized by a borrower with financial leverage that significantly exceeds industry norms. The guidance focuses attention on key areas that include: establishing a sound risk-management framework; underwriting standards; valuation standards; pipeline management; reporting and analytics; risk rating leveraged loans; participants; and stress testing. This guidance applies to financial institutions supervised by the agencies that engage in leveraged lending activities.

Read more about lending guidance here:

http://www.fdic.gov/news/news/press/2013/pr13021.html

A final rule establishing new appraisal requirements for higher priced mortgage loans was issued by federal financial regulatory agencies. The rule implements amendments to the Truth in Lending Act. For mortgages with an annual percentage rate that exceeds the average prime offer rate by a specified percentage, the final rule requires creditors to obtain an appraisal or appraisals meeting certain specified standards, provide applicants with a notification regarding the use of the appraisals, and give applicants a copy of the written appraisals used.  The final rule is effective January 18, 2014.

Read the Final Rule on Appraisals for Higher-priced Mortgage Loans:

http://www.fdic.gov/news/news/press/2013/pr13004.pdf