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ICBA Expresses Concerns as House Marks Up Mortgage Bill

Washington, D.C. (Nov. 6, 2007)—The Independent Community Bankers of America (ICBA) thanked House Financial Services Committee Chairman Barney Frank (D-Mass.) and Ranking Member Spencer Bachus (R-Ala.) for the bipartisan effort to reform the mortgage origination process to protect consumers through the Mortgage Reform and Anti-Predatory Lending Act of 2007 (H.R. 3915), but expressed concern that the bill could harm community banks, their customers and their communities and offered suggestions for improvements as the committee began its markup of the legislation.

"ICBA appreciates the efforts of Reps. Frank and Bachus to address the problems of unregulated lenders and brokers in the mortgage lending market," said James P. Ghiglieri, Jr., ICBA chairman and president of Alpha Financial Group, Inc., Toluca, Ill. "Community banks are distressed by the harm to communities caused by unwise subprime lending, inappropriate use of non-traditional loan products and widespread foreclosures. Unlike unregulated mortgage lenders and brokers, community banks are among the most highly regulated financial institutions in the country, subject to extensive oversight and a regulatory structure that already identifies and removes bad actors. Unnecessary and redundant requirements could push some community banks out of the mortgage business, reducing consumer options in the marketplace."

ICBA noted the manager's amendment includes a number of improvements to the original bill. ICBA said it supports an exemption for regulated financial institutions from registration and licensing requirements, but does not oppose a bifurcated system that subjects non-depository brokers and lenders to both licensing and registration and limits regulated banks to registration of loan officers without individual licensing or minimum qualification requirements.

"Community bank loan officer registration should not require background checks or fingerprinting beyond what is already required by federal bank regulators," said Camden Fine, ICBA president and CEO. ICBA supports flexibility granted to regulators to make de minimis exceptions to bank registration requirements to minimize regulatory burden. ICBA also suggested that national banking regulators act as a clearinghouse for registration information.

Further, ICBA said it appreciates clarifications in the manager's amendment to the "duty of care" required of mortgage loan originators by limiting it to the knowledge the loan officer had about the borrower at the time of the conversation and linking duty of care to the borrower's ability to repay. But ICBA urged that the new standard apply to only subprime and predatory mortgage products. "As financial partners and financial educators in their communities, community banks need the freedom to educate their customers on lending and loan products without unnecessary constraints in every conversation," said Fine.

"Community banks are common sense lenders that generally do not offer subprime or exotic mortgages," said Fine. "This week, nearly 1,000 community bank locations are participating in ICBA National Community Bank Mortgage Week in an effort to be part of the solution to the current challenges in the marketplace. Community banks are talking with borrowers who have mortgages with terms they don't understand, have adjustable rate mortgages that are about to reset and need to discuss refinancing options, or are considering making a first home or new home purchase."

ICBA looks forward to working with Congress to advance balanced legislation that protects consumers and preserves consumer options in obtaining credit with community banks.

Read the entire letter at www.icba.org. For information about ICBA National Community Bank Mortgage Week please visit www.icba.org/mortgageweek.