In a letter to CFPB Director Richard Cordray, the Independent Community Bankers of America say that the rule must be revised to ensure that community banks can continue to serve local mortgage markets without being crushed by compliance costs.
The ICBA urged Cordray to allow loans held in small creditors’ portfolios to automatically receive “safe harbor” status as long as they’re held in those portfolios. The ICBA also wants a small-creditor exemption from current escrow requirements for higher-priced loans. The group says current QM and escrow rules make it too expensive for smaller banks to issue mortgage loans to some customers.
"Community banks operate under a completely different business model than that of the larger financial institutions and mortgage companies,” the ICBA letter said. “They underwrite based on firsthand knowledge of their customers and communities, and thrive on the strength of their reputations. As such, community banks have every incentive to make fair, safe, and affordable loans.”
“…These loans are not sold into the secondary market but are kept in portfolio which gives the banks a vested interest in the loans’ performance,” the ICBA added. “Therefore, additional underwriting and escrow requirements only function as unnecessary regulatory burdens that stifle community banks’ ability to provide solid loan products to consumers so they can achieve the American dream of home ownership. This reality seems inconsistent with the CFPB’s mission which is ‘to make markets for consumer financial products and services work for Americans.’”
Community bankers are urging the Consumer Financial Protection Bureau to revise the current qualified mortgage rule.