Answers - Finance

The State of Kentucky has been proactive in an ongoing effort to create the Residential Mortgage Licensing System being developed by the Conference of State

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

Bank Supervisors and the American Association of Residential Mortgage Regulators. Kentucky’s Office of Financial Institutions announced the state’s partici

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

pation and explained what the national effort entails. There are currently 28 states and the District of Columbia committed to participating. The overall

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

purpose of this data management system is to make it easier for lenders to register and be licensed with multiple jurisdictions, and to create a system that

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

makes it easier to track individuals and organizations who engage in mortgage fraud and predatory lending.

Uniform regulatory practices are a good idea if

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

the regulating bodies put the force of the law behind their rules. Recently the best that the FDIC and the Federal Reserve Board could do is issue “guidel

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

ines” with regard to the “nontraditional loan products” and the surge of defaults that is rising as a result of those products. Those guidelines were for f

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

ederally chartered lending institutions, so Kentucky adopted a similar set of guidelines that calls for aboveboard action in the industry.

Specific practic

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

es that were cited are interest only and option ARMs; 100% financing and/or equity refinancing; loans with minimal documentation requirements for the borrow

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

er; and poor explanation of loan terms and conditions by the seller or agent. Kentucky’s regulators put out a memorandum informing lenders and brokers that

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

they were “expected to follow” the guidelines and provided details on their website.

Kentucky apparently intends to put some teeth into this assortment of

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

guidelines in their licensing renewal process with state chartered institutions. According to the State, “At upcoming regulatory examinations, agency exami

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

ners will be requesting specific information in addition to regular documentation requests.”

“For example, one of the items to be requested will be a listi

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

ng of all loans generated that have single premium credit insurance financed...If a large volume of loans with this type of financing are identified, bank m

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

anagement will be responsible for articulating why this type of product was beneficial to the borrower, and what other alternative products were considered

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

but not utilized. Other regulatory requests may be developed…to ensure that no predatory lending practices are prevalent in the banking industry…This agency

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

will also be using the directives from the OCC as a baseline in approaching regulatory supervision in this area. Bank Management should become familiar wit

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

h the contents of these directives.”

Kentucky consumers should be aware of the ongoing interest in shoddy banking practices and mortgage fraud that emanate

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

s from professionals in the industry. If a potential borrower encounters agents or brokers that suggest such things as inflated appraisals, the state’s reg

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

ulatory structure seems prepared to respond to mortgage related complaints. For additional information, visit http://www.kfi.ky.gov/consumerinfo/alerts.htm

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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