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ICBA Voices Serious Concerns with QRM Provisions

Washington, D.C. (June 22, 2011)—The Independent Community Bankers of America (ICBA) today stood with members of Congress to tell the regulators the association has serious concerns about the narrow definition of “qualified residential mortgages” (QRM) included in a proposed rule to implement risk retention sections of the Dodd-Frank Wall Street Reform and Consumer Protection Act.   

“Our nation’s rich and diverse network of common-sense community banks makes the mortgage market more competitive, and they are frequently the only lenders serving small towns and rural areas and willing to deliver customized loans their local customers need,” said Camden R. Fine, ICBA president and CEO.  “Because risk retention will require increased capital, a narrow definition of QRM would have the potential to drive thousands of community banks and other lenders from the residential mortgage market, leaving it to the largest lenders, whose actions brought about the financial crisis.” 

 Too restrictive a definition, and in particular an unreasonably high down-payment requirement, will severely limit credit availability to many borrowers whose creditworthiness can be assured with proper underwriting.  “We believe the QRM exemption should be sufficiently broad to encompass the majority of the residential mortgage market, consistent with strong underwriting standards,” Fine said.  

 In particular, ICBA has serious concerns with the 20 percent down-payment requirement for qualified borrowers.  Such a high down-payment requirement will be particularly hard for first-time and lower income borrowers to meet—borrowers who have the ability to meet their mortgage obligations but have not been able to save such a significant amount.  Congress recognized this problem when it decided not to include a down-payment requirement in the law.

 “Policymakers must proceed with caution,” Fine said.  “The mortgage market is critical to the broader economy, as we learned during the recent crisis, and the potential for unintended consequences is significant.  We look forward to working with the agencies to ensure these concerns are addressed.”