QM Amendments Can Minimize Effect of Drop in Community Bank Lending
The qualified mortgage rule will limit mortgage lending by community banks, which currently represent approximately 20% of the national mortgage market, according to the Independent Community Bankers of America.
Unless Congress offers safe harbor status for community bank loans held in portfolio the drop in resources has the potential to “hamper the housing recovery,” urges Jack Hartings, vice chairman of the Independent Community Bankers of America.
At least four pieces of legislation have been introduced by members of the House Financial Services Committee: The Protecting American Taxpayers and Homeowners Act (H.R. 2767), the CLEAR Relief Act (H.R. 1750), the Portfolio Lending and Mortgage Access Act of 2013 (H.R. 2673) and CFPB Rural Designation Petition and Correction Act (H.R. 2672).
ICBA, the nation’s representative of over 7,000 community banks, is urging Congress “to advance legislation to limit the adverse consequences” of new Consumer Financial Protection Bureau mortgage rules.
“There is no question” that the new QM has the potential to drive many community banks with fewer resources out of the mortgage market and curtail access to mortgage credit, Hartings noted in his testimony before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit.
The primary negative effect of QM will be on the customers it will not be able to accommodate, says Hartings, who is also president and CEO of the Peoples Bank Co. in Coldwater, Ohio.
The rule restricts low-dollar-amount loans, balloon-payment mortgage loans, higher-priced mortgage loans “and other safe, legitimate loans that will fail to meet the QM definition,” he said, while urging policymakers to expand the “small creditor” definition under the QM rule by raising the loan-volume threshold above 500 mortgages and disregarding loans sold into the secondary market.
ICBA supports legislation that will enable community banks to hold in their portfolios more loans, including balloon loans in rural and non-rural areas, that ultimately enables borrowers to have “continued access to community bank credit without compromising consumer protection or safety and soundness,” he noted.