Wed Apr 18, 2012 3:00pm EDT
* 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.
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