Recently, the Independent Community Bankers of America (ICBA) and a 45-member coalition of state and regional banking associations submitted a letter to the Consumer Financial Protection Bureau (Bureau) urging the agency to expand the small creditor exemptions under certain Title XIV mortgage rules that went into effect in January 2014. The ICBA argues that changes are needed to ensure community banks can continue to serve their respective mortgage markets without being burdened by expensive compliance costs.
Specifically, the ICBA would like mortgage loans that small creditors hold in their respective portfolios to automatically receive qualified mortgage safe harbor status as long as the loans are held in portfolio. The letter also calls for a small creditor exemption from escrow requirements for higher-priced mortgage loans held in portfolio. The ICBA claims that the current escrow and qualified mortgage rules make it too cumbersome and expensive to originate loans to certain consumers.
Under the current mortgage rules, small creditors are exempt if they originate 500 or fewer first lien mortgages in the preceding calendar year and have less than $2 billion in total assets at the end of the preceding calendar year. The ICBA believes the loan threshold is too low and notes that many community banks do not qualify for the exemption because they originate more than 500 loans annually.
In support of expanding the exemption, the ICBA argues that community banks operate differently than large creditors. The letter states that community banks know their customers personally, underwrite loans based on personal relationships, and keep a large number of nontraditional loans in their own portfolios. Finally, the ICBA contends that community banks serve a set of consumers that would be unable to get loans through traditional channels.