Bankers set steps to cut subprime woes

WASHINGTON -- Five banking industry groups unveiled a set of principles, including more clearly disclosed loan terms, they're advocating for lenders, lawmakers, and regulators trying to protect borrowers with subprime housing loans.

Lenders should issue loans only if borrowers can afford to repay them and should work with consumers to prevent foreclosures, the groups, including the American Bankers Association, the Financial Services Roundtable, and the Mortgage Bankers Association, wrote in a statement released yesterday .

"There's going to have to be some form of uniform standard by which the consumer and the industry can abide by and live with," James Ballentine, the American Bankers Association's director of housing, said in a telephone interview.

The principles are similar to subprime mortgage lending guidelines federal bank regulators proposed in March and recent proposals in Congress to find ways to keep subprime borrowers facing rising payments in their homes.

Lenders "are actively working to contact their customers who may need assistance to offer options and prevent foreclosures whenever possible," the groups said in their statement. Regulators should balance stronger consumer protections against "unintentionally limiting the availability of home ownership to credit worthy borrowers," the statement said.

The statement was also signed by the Consumer Bankers Association and America's Community Bankers.

Subprime mortgages are extended at rates at least 2 or 3 percentage points above prime loans. Borrowers typically have poor or limited credit histories.