Home / News / Government / Proposed Bill Would Allow Banks to Classify Modified Loans as Accruing
Print This Post Print This Post

Proposed Bill Would Allow Banks to Classify Modified Loans as Accruing

Congressman ""Bill Posey"":http://www.billposey.com/ (R-Florida) introduced a ""bill"":http://financialservices.house.gov/UploadedFiles/112hr1723ai.pdf which would allow lenders to classify modified loans as accruing rather than non-accruing.

[IMAGE]

Posey claims federal bank regulators are hindering the ability of community banks to modify home loans and keep homeowners out of foreclosure.

The bill would allow banks to classify any loan as performing if it is current, no more than 30 days delinquent in the last six months, an amortizing loan, and not funded through an interest reserve account.

""Common sense says if you are making your loan payments on time then regulators should not force banks to foreclose on property owners asking for a

[COLUMN_BREAK]

modification or consider your loan to be in non-accrual status. As long as payments are being made, your loan should be considered in good standing, particularly in this economy,"" Posey said.

The House Financial Services Committee's Subcommittee on Financial Institutions and Consumer Credit held a hearing Friday to review the bill.

""While all banks accept the need for balanced regulatory oversight, the pendulum has swung too far in the direction of over-regulation,"" James H. McKillop, president and CEO of the Independent Banker's Bank of Florida said on behalf of the ""Independent Community Bankers of America."":http://www.icba.org/

He noted that examiners are ""placing loans on non-accrual even though the borrower is current on payments.""

Opposing the bill, Simon Johnson of the MIT Sloan School of Management said, ""classifying loans as ‘accrual' when they are either not receiving the full interest due or when the institution knows there will be a problem is not a good idea.""

""This will make the bank's capital position look better than it really is and detract from the credibility of their financial statements,"" he added.

Posey's ""Common Sense Economic Recovery Act"":http://financialservices.house.gov/UploadedFiles/112hr1723ai.pdf (H.R. 1723) has 38 cosponsors.

If enacted, the bill would be enforced for two years.

About Author: Krista Franks Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.
x

Check Also

Senate Hearing Tackles National Flood Insurance Program Reauthorization

Senate Banking Committee Chair Sharrod Brown recently held a hearing to discuss the future of the National Flood Insurance Program, featuring a panel of experts highlighting the many repercussions of an expiration in the program.