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Last update: 10/21/14

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ICBA Supports Federal Effort to Address Predatory Lending; Urges Focus on Subprime, Non-traditional Mortgages

Community Banks Are Common Sense Lenders

Washington, D.C. (April 10, 2008)—The Independent Community Bankers of America (ICBA) urged the Federal Reserve to limit the application of its proposed rule under Regulation Z, which implements the Truth in Lending Act and the Home Ownership and Equity Protection Act, to subprime and non-traditional loan products and cautioned federal regulators against tightening regulations so much that they choke off traditional high quality mortgage lending conducted by community banks, limiting consumers choices and access to credit.

"ICBA strongly supports efforts by the Federal Reserve to address unfair, abusive or deceptive practices undertaken by segments of the residential mortgage lending industry that have caused some of the most serious housing sector problems this nation has experienced in decades," said Karen Thomas, ICBA executive vice president and director of government relations. "Clearly, many homeowners and communities are suffering as a result of the unconscionable practices conducted by some lenders.

"But community banks have not engaged in irresponsible lending and underwriting and are common sense lenders who help borrowers find a mortgage that is affordable and right for them." said Thomas. "We strongly object to elements of the proposal that punish community banks that have behaved properly in their lending practices with additional regulatory burden."

ICBA told the Federal Reserve in a comment letter that the proposed definition of a "higher priced" mortgage is so constraining that it would include many loans made at or near average mortgage interest rates, and traditional community bank portfolio loans regardless of credit quality. Community banks have avoided making "higher priced" loans, as defined by current regulations. The proposed definition is so stringent that it will cause them to refrain from making loans they currently are providing to customers. The result will be less credit available in an already tight credit environment.

Read the complete letter at www.icba.org.

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