Some of the new best practices on subprime lending include:

· Providers should ensure that they do not engage in predatory lending practices.

· Communications with consumers, including advertisements, oral statements, and promotional materials, should provide clear and balanced information about the relative benefits and risks of the products.

· Information provided to consumers should clearly explain the risk of payment shock and the ramifications of prepayment penalties, balloon payments, and the lack of escrow for taxes and insurance, as necessary.

· Providers should verify and document the borrower's income (both source and amount), assets and liabilities.

The best practices were developed by the Conference of State Bank Supervisors (CSBS), the American Association of Residential Mortgage Regulators (AARMR), and the National Association of Consumer Credit Administrators (NACCA) in response to the federal financial regulatory agencies' Statement on Subprime Mortgage Lending that was released on June 29. The best practices were designed to apply to lenders and mortgage brokers who are not regulated by the federal financial regulatory agencies.

"These best practices address the concerns we have identified in the subprime mortgage markets," stated Nick Griffin, commissioner for the department's Division of Financial Institutions. "We believe a coordinated effort among federal and state regulatory agencies is necessary to provide consistent and effective oversight of subprime lending and overall supervision of the mortgage industry."

The CSBS/AARMR/NACCA best practices substantially mirror the federal interagency statement agreed upon by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the National Credit Union Administration, and supported by the FFIEC's State Liaison Committee.

"However, the state mortgage regulators modified the federal interagency statement to address issues applicable to non-depository mortgage lenders and mortgage brokers who originate loans but do not hold them in portfolio," explained Griffin. "These lenders and brokers are generally licensed and regulated by the states."

"In conjunction with the Best Practices for Nontraditional Mortgage Products adopted in November 2006, these new DCCA best practices on subprime lending offer sound underwriting and consumer protection principles that all residential mortgage providers should consider when making residential mortgage loans," said DCCA Director Lawrence Reifurth.

DCCA's Professional and Vocational Licensing Division (PVL) is responsible for 25 professional boards and commissions and 20 licensing programs, in total, licensing 45 different professions and vocations, including mortgage brokers and solicitors.