RSSWhile at first the CFPB Community Bank Advisory Council appeared to be a public relations maneuver, bankers attending the council’s meetings have found Consumer Financial Protection Bureau Director Richard Cordray and his staff responsive to their concerns. “Director Cordray came and stayed for the whole meeting,” said Robin Loftus, chairman of the Community Bank Advisory Council and executive vice president of the $155 million Security Bank, Springfield, Ill. “He was extremely responsive to us; when they heard our counter-examples they seemed willing to go back to the drawing board.”
With the mortgage rules due for release on Jan. 21, community bankers on CBAC’s conference call with the Bureau on Dec. 16 were asked about balloon mortgages. Already a target for increased risk weighting under Basel III, the CFPB also has its eye on them as a “non-traditional” mortgage. The community bankers were able to share with the Bureau that community banks are often encouraged by their prudential regulator to write balloon mortgages. Residing in small communities with few comparable properties, these banks often cannot sell mortgages into the secondary market because there are not enough comparable properties to meet the underwriting standards. Community banks also cannot hold a standard 30-year fixed-rate mortgage in their portfolios because of the interest rate risk.
“When Cordray heard that a community often cannot sell a balloon mortgage into the secondary market, he was surprised,” Loftus said. “We are helping remind them of the difference between community banks and the larger banks that don’t depend on the community.”
Loftus has cautious optimism about her impact on new regulations. “I think the [CFPB] has good intentions,” she said. “We told them not to waste our time and money, or that of our banks.” (The bankers on the advisory council pay their own expenses.)
The Bureau is not required to use any of the suggestions produced by the community bankers. And the pressure to release a rule may overcome any accommodation the Bureau had planned for small banks. On the qualified mortgage rule, Cordray has already indicated that a rule from the CFPB will be less burdensome than rules written by Congress. Cordray told Illinois community bankers in early December that the Bureau’s qualified mortgage rule must be released by Jan. 21. If the CFPB misses the deadline, Congress will intervene with more onerous rules, he said.
