The federal banking regulators' proposal to establish concentration thresholds for commercial real estate lending is "flawed" and should be abandoned, according to the Independent Community Bankers of America."We urge the regulators to abandon the proposed concentration thresholds and look at an institution's credit risk and risk management practices on a case-by-case basis," the ICBA says in the comment letter on the proposed CRE guidance. The ICBA and the American Bankers Association also raise the concerns that the thresholds, which can trigger additional capital and risk management requirements, could end up curtailing CRE lending. "As CRE lending has been one of the few remaining major profit lines for community banks, they are deeply concerned about the negative impact of this guidance on them and, consequently, on the their communities," the ABA says. Meanwhile, the Mortgage Bankers Association said the burden should be on examiners, not the thresholds, to prove that additional capital or "heightened risk management practices" are necessary. "We recommend that the agencies develop a definition and guidelines that will avoid the inconsistent application of heightened risk management practices," the MBA says.

Subscribe Now

Authoritative analysis and perspective for every segment of the mortgage industry

30-Day Free Trial

Authoritative analysis and perspective for every segment of the mortgage industry