Just in case you think your advocacy voice is never heard, I’m here to tell you it is! Bear with me and I’ll explain.
Last week, the CFPB released its interim final rule easing mortgage restrictions on many small creditors by expanding the number of community banks eligible for escrow and balloon loan exemptions. This resulted from community banking relief provisions in the recently passed Highway Bill.
So, effective March 31, 2016, any small creditor (in our case, community banks having $2 billion or less in assets who originate fewer than 2,000 loans per year including portfolio loans) that makes a SINGLE loan in a rural or underserved area in the previous year can receive; (1) the portfolio balloon loan exception (including Qualified Mortgage safe harbor status) and (2) the higher priced loan escrow exemption for rural lenders. This is a big deal for ICBND members as community banks were only eligible for these exemptions previously if they operated “PREDOMINANTLY” (meaning more than 50% of mortgage loans) in rural or underserved areas.
Obviously, this result came from a great deal of advocacy. One active participant, in particular, sticks out. In October of last year, Sarah Getzlaff from Security First Bank of North Dakota took it upon herself to share with ICBA the adverse effects the rule had on her bank and its customers – in plain, understandable English. A small creditor by almost any standard, her bank is less than 10% of the $2 billion asset threshold and it closed a fraction of the first lien loan threshold. Yet, the bank was disallowed small creditor status because more than 50% of its mortgages were secured by properties in areas defined as non-rural (in this case, the Bismarck-Mandan area).
The losers in her compelling example were the bank’s customers in New Salem and Center where it is the only bank in each town and, in fact, the only bank in Oliver County. In the absence of small creditor status, her bank would no longer be able to make balloon-payment qualified mortgages in these communities where it’s often difficult for residents to qualify for secondary market financing.
Sarah’s example was used effectively with Congress and the CFPB to cause positive rule change expanding the number of community banks that can utilize balloon loan exemptions. Was it the tipping point? Who knows. Did it make a difference? Heck yes!
Talk to you soon.