* G20 body says income must be verified before granting home
loan
* G20 to check member country compliance with new mortgage
safety rules
LONDON, April 18 (Reuters) – Regulators published global
guidance on Wednesday to make granting home loans more rigorous
five years after the worst financial crisis in decades emerged
from a small corner of the U.S. mortgage market.
The Swiss-based Financial Stability Board (FSB), a
regulatory task force for the world’s top 20 economies, said
poorly underwritten home loans contributed significantly to the
global financial crisis.
National supervisors from G20 countries will be expected to
ensure that lenders verify and document each applicant’s job
status, income and ability to repay the loan in full.
Countries like Britain have already cracked down on
so-called “liar loans” where a mortgage is based on an
applicant’s declared rather than verified income.
Supervisors should also set “appropriate” loan-to-value
ratios or how much of the purchase price can be borrowed.
The FSB stopped short of requiring a minimum LTV ratio, a
step that would intrude on domestic political sensitivities in
the supply of credit and be impossible to police globally.
G20 finance ministers meet this week to review progress on a
welter of new financial rules and principles, such as on home
loans, that their leaders have pledged to implement.
“After providing sufficient time for implementation of the
principles, the FSB will conduct a follow-up review to assess
progress made in implementing the framework,” the FSB said in a
statement.
