ICBA Policy Resolution: GSE Lending: Operational Concerns


  • ICBA will actively engage the Federal Housing Finance Administration (FHFA) and the GSEs regarding overly burdensome policies and practices, including underwriting guidelines, appraisal requirements, and servicing requirements that increase the cost, operational burden, and difficulty of using the GSEs and thereby impact access to credit in rural or small-town communities.
  • Key focus items are:
    • Underwriting and property appraisal guidelines and policies should not discriminate against properties and borrowers in rural or small-town markets.
    • Mortgage servicing requirements from the GSEs should not conflict with the community bank business model and cost structure.
    • Quality control/ loan manufacturing policies and requirements are overly complex and add considerable cost to the process making it harder for smaller lenders to sell directly to the GSEs.
  • The Federal Housing Finance Agency, the housing GSEs, the Department of Housing and Urban Development, the Federal Housing Administration, and the CFPB should not develop or implement any rule or practice that by design or in effect would limit participation by community banks in the mortgage market or in government programs intended to promote housing.


Underwriting and Appraisal Guidelines

The GSE underwriting and appraisal guidelines, originally designed for suburban or urban communities, often make it difficult to qualify creditworthy borrowers in small town or rural communities. In such communities, borrowers frequently have multiple sources of income such as seasonal, self-employed, or W2 wages, all of which are critical in qualifying the borrower for the loan. While community bankers routinely and safely approve portfolio loans for these borrowers, it has always been difficult to qualify them for a GSE loan. In addition, the diverse nature of properties in these markets makes it challenging for appraisers to document and support the value of a property in a manner that is acceptable to the GSEs.  ICBA has and will continue to work with the GSEs on developing case studies and best practices that will help expand acceptance of loans from small town and rural communities, which in turn will help expand access to credit in these communities.  

ICBA is particularly concerned that as appraisers retire or leave the business in rural and small-town communities community bank lenders may not be able to access the secondary market due to their difficulty in obtaining a property appraisal that meets secondary market guidelines.  ICBA will continue to work with the GSEs and the FHFA to develop alternatives to standard residential property appraisals, which may only be completed by a licensed and certified appraiser.


Community bank mortgage loan servicing is based on close ties to customers and communities. The cost to a service mortgage has doubled since the financial crisis, forcing many community banks to exit the mortgage servicing business. Community banks did not perpetrate abuses in servicing and should be exempt from any prescriptive standards that make servicing too costly for them. The GSEs must structure their servicing guidelines so they do not drive small community bank servicers out of the business. Servicing helps community banks remain competitive in the mortgage origination business. Any changes to mortgage servicing standards or compensation should not encourage additional consolidation of the mortgage servicing business in the largest aggregators. 

Staff Contact: Ron Haynie