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ICBA Argues CFPB Rules Not Applicable for Community Banks

Community banks should be exempt from pending regulations on high-cost mortgages since they were not responsible for the mortgage crises, the ""Independent Community Bankers of America"":http://www.icba.org/ (ICBA) stated in a release.


In July, the ""Consumer Financial Protection Bureau"":http://www.consumerfinance.gov (CFPB) announced it was ""proposing rules for high-cost mortgages"":http://www.regulations.gov/#!documentDetail;D=CFPB-2012-0029-0016, which would be determined based on interest rates, points and fees, or prepayment penalties.

The proposals for high-cost mortgages include a ban on prepayment penalties and a general ban on balloon payments. Late fees would be capped, and there would be restrictions on charging fees when consumers ask for a payoff statement.


In addition, consumers would be required to receive housing counseling before taking out a high-cost mortgage.

In a comment letter to the CFPB, ICBA made the argument that community bank portfolio loans should be exempt so they can maintain a position in the mortgage market.

""ICBA understands the intent of Congress to further regulate the mortgage industry to prevent these abuses from occurring in the future and further stabilize the housing market,"" ICBA wrote in the comment letter. ""Nevertheless, the reality is that more stringent and complicated mortgage requirements will further stymie the housing market and community banks' flexibility in providing mortgage loans to their customers.""

In the letter, ICBA also said the CFPB's definition of points and fees is too broad and should be clarified for open-end and closed-end credit.

In addition, the group suggests allowing financial institutions to correct unintentional violations to avoid the expense and burden of litigation for accidental errors.

ICBA also argued for balloon payment loans if they're held in portfolio until maturity, stating, ""Community bank balloon payment mortgage loans are low-risk loans that community banks have used to serve the unique needs of their customers for decades.""

About Author: Esther Cho


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