This story appeared in Bank Digest.
The FDIC has issued new guidance on the classification of refinanced mortgages with a high loan-to-value ratio. According to the agency, a high LTV ratio is not, alone, a reason to adversely classify such a loan. Retail loan classifications should be based on the borrower's payment performance, not on the value of the collateral, as that value can rise and fall with changes in market conditions. The guidance applies to residential refinance loans that lower the mortgage interest rate to a market rate and that follow sound underwriting guidelines other than having a high LTV ratio.



