FDIC Head Calls for Tighter Lending Standards

Banks seeking government guarantees for mortgage debt should be required to hold borrowers to tight and consistent standards, Federal Deposit Insurance Corp. Chair Sheila Bair said in a CNBC interview.

Bair said standards should include “very robust” income documentation, proof of a borrower’s ability to repay standard loans, and a significant down payment.

“Clearly there is a strong correlation between the amount of skin in the game a borrower puts in up front and how that loan performs,” Bair said. “Do you put 20 percent down? You’re committed to that house. You walk away from that house, you’re going to lose a lot of the money that you put in up front.”

Source: CNBC.com (09/09/2010)

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