Community banks were not responsible for the mortgage crisis, and therefore community bank portfolio loans should be exempt from pending regulations on high-cost mortgages the Independent Community Bankers of America (ICBA) said in a comment letter to the Consumer Financial Protection Bureau (CFPB). The ICBA feels that the CFPB should provide exemptions for community bank portfolio loans to ensure that community banks are not driven from the mortgage market and can continue to serve customers in their communities.
“ICBA understands the intent of Congress to further regulate the mortgage industry to prevent these abuses from occurring in the future and further stabilize the housing market,” ICBA wrote in the comment letter. “Nevertheless, the reality is that more stringent and complicated mortgage requirements will further stymie the housing market and community banks’ flexibility in providing mortgage loans to their customers.”
In its comment letter on proposed amendments to the Home Ownership and Equity Protection Act (HOEPA), ICBA noted that the CFPB’s definition of points and fees is too broad and should be clarified for open-end and closed-end credit. The association wrote that third party and affiliate fees and employee compensation should not be included in calculating points and fees.
ICBA also wrote that the CFPB should allow financial institutions to correct unintentional violations. The association wrote that creditors should have at least 60 days to find mistakes and notify the consumer and at least 30 additional days to correct the error, which would benefit consumers and allow banks to address any inadvertent mistakes without the expense and burden of litigation.
Finally, ICBA wrote that HOEPA regulations should allow community banks to continue to provide balloon payment mortgage loans if the loans are held in portfolio until maturity. Community bank balloon payment mortgage loans are low-risk loans that community banks have used to serve the unique needs of their customers for decades. CFPB regulations that do not allow these community bank loan products will harm consumers in the long term, not help them.