The Conference of State Bank Supervisors (CSBS) has called for broader exemptions from rules under Regulation Z for those institutions which hold the credit risk for residential mortgage loans. The CSBS comment letter was in response to the Federal Reserve Board’s (FRB) Proposed Rule on Regulation Z.
The proposed rule revises the escrow account requirements for higher-priced, first lien “jumbo” mortgage loans. CSBS acknowledged that the Dodd-Frank Act requires the change but urged the FRB to go beyond the specific requirement in order to facilitate more traditional residential mortgage lending.
“Institutions which portfolio mortgage loans have a greater incentive to ensure a borrower’s ability to repay and fund the total cost of homeownership, including property taxes and insurance,” wrote CSBS President and Chief Executive Officer Neil Milner in the comment letter. “This dynamic needs to be considered as rules and standards are determined.”
To that end, CSBS recommended the FRB hold field hearings to hear first-hand from community banks and local officials to better understand the impact changes in mortgage finance are having on banks’ ability to originate mortgage loans.
“We are concerned about the unintended consequences mortgage rules are having on traditional banking models,” said Michael Stevens, CSBS senior vice president of regulatory policy. “We fear some traditional community banks are unnecessarily being forced out of the residential mortgage market, to the detriment of the communities and consumers those banks serve.”
Click here to view the CSBS comment letter.
For more information, visit www.csbs.org.