Small Banks Want Further Exemptions from QM Rule

The Consumer Financial Protection Bureau has removed some obstacles to community banks offering balloon mortgages in rural areas, but the exemption in the qualified mortgage rule should be expanded further, according to the Independent Community Bankers of America.

Final changes to the QM rule issued Friday made it easier for community banks to continue to originate high-cost mortgages with balloon payments even if they don't operate in predominately rural or underserved areas.

But the ICBA believes all community banks that portfolio balloon mortgages should be exempt from the general ban on balloon lending in the QM rule that goes into effect in January. In addition, the banks should be exempt from the CFPB's escrow requirements.

Community banks have made these loans for years without any problems, according to ICBA senior vice president Ron Haynie. Now there are concerns that some won't be able to continue making balloon mortgages depending on their size or location, he added.

The ICBA also believes that any loans community banks make and put in portfolio should be given a QM safe harbor. “We are continuing to lobby for that,” Haynie in an interview.