FSA will make it harder to get loans – Aftenposten

6. March gave Treasury Jensen (FRP) FSA ten days to consider measures to slow the growth in housing prices and people’s mortgage debt.

Monday was a ready answer, and in the letter FSA proposes a regulation that is based on the agency’s guidelines for mortgage.

Authority informs that a narrowing of the exercise of discretion is the most important contribution to tighter lending practices.

– Despite some objections, the FSA concluded that it is most appropriate to establish a requirement demands lending practices. A regulation fixing is necessary to remove or severely restrict banks’ room to waive standards of lending practices, writes FSA said in a statement.

2.5 percent a year

FSA will make it harder getting loans, partly because the interest rate increase that will be the basis for stress testing of the borrower’s ability to pay will be increased by 1 percentage point. Thus borrowers must be able to withstand an interest rate increase of 6 percentage points compared to the current 5 percentage points.

FSA will also introduce a requirement for at least 2.5 percent annual installment payment from the first year for all repayment LTV above 65 percent. This corresponds installment requirement for a serial with 40 years maturity.

The Authority will retain maximum LTV for the repayment of 85 percent of property value, but this can be increased if it can be reassuring additional collateral in another property.

Moreover, reduced the maximum LTV for credit lines from 70 percent to 65 percent, and without the possibility of higher leverage after special justifiability assessment.

The Authority has dropped point in the guidelines which pledged personal security (bail / guarantee) for part of the loan equated with security in other property as a basis for higher LTV than 85 percent.

Temporary

FSA notes that a regulation will provide the basis for a tighter supervisory. When banks can partly be ordered if they violate regulations provisions.

The Authority also believes that the regulation should only be a temporary arrangement and that it should be abolished, possibly adjusted when market conditions make it necessary.

Ultimately, it is the Ministry of Finance which has statutory authority to establish regulations that regulate banks’ lending practices.

If the Ministry needs to consider models that provide more flexibility than in Finance’s proposal, the Authority believes that this should be limited to the requirement of LTV for repayment. The Authority believes it that banks can optionally be given the opportunity to make loans to borrowers with little equity, but very good capacity.

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Published: March 17th. 2015 9:24