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ICBA Testifies on House Plan to Reform Secondary Mortgage Market

Washington, D.C. (July 18, 2013)—The Independent Community Bankers of America® (ICBA) today told Congress that the association appreciates and is pleased that lawmakers are discussing reforms to housing-finance rules and the government-sponsored enterprises (GSEs). Testifying before the House Financial Services Committee, ICBA Chairman Bill Loving said that reforming the GSEs is necessary and that the community banking industry looks forward to working with lawmakers as the reform process moves ahead. ICBA is encouraged by committee Chairman Jeb Hensarling’s (R-Texas) effort, which includes commendable mortgage financing regulatory relief reforms, and the association believes the measure is something we can work with.

Loving, who is president and CEO of Pendleton Community Bank in Franklin, W.Va., explained that as a relationship lender, meeting the demand for local mortgages is critical to his community bank’s broader customer relationships and business model. He said that as the housing market recovers, he expects his community bank to continue to sell an increasing number of loans into the secondary market.

“Secondary market access is critical even for a bank such as Pendleton that is primarily a portfolio lender,” he said during his testimony. “Any changes to the housing finance system must preserve equal and direct access to the secondary market to safeguard the role of community banks in providing mortgage credit in the communities we serve. It is critically important to borrowers and the broader economy that the details of any reform are done right.”

Loving said that ICBA strongly supports regulatory-relief provisions of the Protecting American Taxpayers and Homeowners (PATH) Act, proposed by Chairman Hensarling and other members of Congress. In particular, ICBA supports the act’s mortgage-lending regulatory-relief provisions—notably “qualified mortgage” status for portfolio loans and repeal of the new credit risk retention requirement—to facilitate community bank participation in the mortgage market. Further, the provisions of the Capito-Maloney proposal to create an expedited examination appeals process will go a long way toward improving the oppressive examination environment, which is impeding the flow of credit in our communities.

Loving also noted ICBA’s appreciation for Chairman Hensarling’s effort to protect community banks from Basel III by including in the act a two-year “stop-and-study” delay for community banks. ICBA supports a full exemption from Basel III for banks with less than $50 billion in assets.

ICBA knows this is still the early stages of a long policy debate and will continue to work closely with Congress to ensure the unfolding mortgage reform proposals support the community banking sector’s mortgage lending needs and fosters a workable secondary market. Notably, Loving told committee members that a successful secondary mortgage market must:

  • be impartial and provide equal access and equal pricing to all lenders regardless of their size or lending volume,
  • be financially strong and reliable enough to effectively serve mortgage originators and their customers even in challenging economic circumstances,
  • not appropriate customer data for cross-selling of financial products,
  • provide originators the option to retain servicing and ensure servicing fees are reasonable, and
  • focus resources on supporting residential and multifamily housing.

ICBA appreciates the committee’s efforts to include community banks in the discussion about housing-finance reform and looks forward to continuing to work with committee members on the reform process.

For more information, visit www.icba.org.

About ICBA
The Independent Community Bankers of America®, the nation’s voice for nearly 7,000 community banks of all sizes and charter types, is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education and high-quality products and services. For more information, visit www.icba.org.

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