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ICBA Welcomes Changes to Truth in Lending Rules

Final Rule Addresses Community Bank Concerns on Original Proposal

Washington, D.C. (July 14, 2008)—The Independent Community Bankers of America (ICBA) welcomed the changes that the Federal Reserve Board of Governors made to the final Truth-in-Lending rules as part of Regulation Z to increase consumer mortgage protections.

"ICBA believes that the rule contains a number of elements - including income verification requirements, prohibitions on coercion of appraisers, better controls on prepayment penalties, and new advertising rules - that will address unfair, abusive or deceptive practices undertaken by segments of the residential mortgage lending industry that have contributed to the most serious housing sector problems this nation has experienced in decades," said Karen Thomas, ICBA executive vice president and director of government relations.

"We are very pleased that the Federal Reserve took into account concerns raised by ICBA and community banks about the definition of 'higher-priced' mortgage loans and changed it to better reflect real mortgage rates, focusing protections where they are needed most, on subprime loans," said Thomas.

ICBA had strongly objected to the proposed definition that would have defined and tainted as "higher priced" loans the traditional loan products community banks across the country have offered in a responsible manner for many years. In the final rule, "higher priced" mortgage loans are those where the Annual Percentage Rate exceeds the average prime offer rate by 1.5 percentage points for first liens or 3.5 percentage points for subordinate liens, based on data from the Primary Mortgage Market Survey conducted weekly by Freddie Mac. The Federal Reserve had proposed that the definition be indexed to Treasury securities with limits of 3 percentage points for first liens and 5 percentage points for subordinate liens, which would have included many prime loan products.

"This rule covers all mortgage lenders and we encourage the Federal Reserve to work closely with other federal and state regulators to ensure that it is fully implemented and enforced across the industry," said Thomas.

Find out more about ICBA and Regulation Z at www.icba.org.