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ICBA Supports Expansion of Subprime Lending Guidance

Proposed Statement Closes Existing Regulatory Gaps

Washington, D.C. (May 8, 2007)—The Independent Community Bankers of America (ICBA) said it supports federal banking regulators' proposed Statement on Subprime Mortgage Lending and called on the regulators to focus on institutions that are active in the subprime segment of the mortgage industry rather than increase regulation across the board.

"ICBA supports the proposed statement as it closes a gap in existing regulatory guidance that may not have addressed certain subprime lending practices," ICBA said in a letter to the Federal Deposit Insurance Corporation, the Federal Reserve, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the National Credit Union Administration which jointly issued the proposed statement.

Community banks do not generally make subprime loans with the characteristics mentioned in the statement, such as "teaser" rates, lack of appropriate borrower income documentation, very high or no limits on reset payments or interest rates. Moreover, community banks do not make loans with features that will likely result in frequent refinancing.

"Community banks have strong incentives to ensure that a borrower receives a mortgage loan that is appropriate for their circumstances. Community banks focus on customer relationships; they want their mortgage customer to have a good experience so they will be willing to do more banking business with them," ICBA said. "Community banks also want the customer to be able to repay their obligation in a timely manner. The low delinquency and foreclosure rates on mortgages made by community banks as compared to the rest of the industry are evidence that they take great care when extending credit."

Read the complete letter at www.icba.org.