Expanding Community Bank Provisions Would Preserve Access to Credit
Washington, D.C. – February 27, 2013 – (RealEstateRama) — The Independent Community Bankers of America® (ICBA) today said that final mortgage rules issued by the Consumer Financial Protection Bureau (CFPB) should be adjusted to avoid leaving many consumers without access to mortgage credit. In a comment letter, ICBA wrote that while it appreciates accommodations for community banks in the CFPB’s new ability-to-repay and qualified mortgage (QM) regulations, the bureau should expand on these efforts to preserve access to credit for small-market customers. The association offered several recommendations to the proposed community bank portfolio loan provisions to ensure community bank customers and communities can continue to pursue the American dream of homeownership.
“Community banks have always been responsible home mortgage lenders and did not participate in lending abuses that drove the financial crisis,” ICBA President and CEO Camden R. Fine said today. “However, the quest to address the sins of less scrupulous and unregulated mortgage lenders could have a negative impact on common-sense community banks and the customers they serve. The CFPB should modify its final rule on qualified mortgages to ensure continued access to the mortgage market for Main Street communities.”
ICBA wrote that it appreciates that the CFPB’s final rule provides flexibility for community banks to continue to offer mortgage loans, including balloon-payment mortgage loans, and proposes a new category of community bank qualified mortgages. However, the association is concerned that the exemptions for community bank portfolio loans do not cover nearly enough community banks, which could drive them out of the market. Because large financial institutions do not provide the type of portfolio mortgage loans necessary to address the unique financial circumstances of community bank customers, these consumers could be left out in the cold.
To help address these concerns and help ensure continued access to mortgage credit, ICBA offered the following recommendations to the CFPB:
Expand the definition of qualified mortgage to include additional loans held in portfolio by small creditors, including balloon payment mortgages originated by small creditors in non-rural markets,
Increase the limit for the number of mortgage loans originated and retained in portfolio to qualify as a community bank lender to 1,000 per year,
Extend the safe harbor conclusive presumption of compliance for community bank mortgage loans held in portfolio with annual percentage rates up to the higher of the average prime offer rate plus 3.5 percent or the community bank cost of funds plus 4 percent, subject to the Home Ownership and Equity Protection Act threshold,
Expand the definition of “rural” for balloon mortgage loans and escrow requirements to include all counties outside metropolitan statistical areas and all towns with fewer than 50,000 residents,
Grant QM safe harbor protection for refinancing balloon mortgage loans after the Jan. 10, 2014, effective date so borrowers with balloon mortgages coming due are not left without refinancing opportunities, and
Do not include mortgage loan originator compensation in the total points and fees calculation for loans that receive the QM designation.
For more information and to read the comment letter, visit www.icba.org/advocacy.
The Independent Community Bankers of America®, the nation’s voice for nearly 7,000 community banks of all sizes and charter types, is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education and high-quality products and services. For more information, visit www.icba.org.