Consumer Financial Protection Bureau Recognizes Sound Community Bank Servicing Practices
Washington, D.C. (Jan. 17, 2013)—The Independent Community Bankers of America (ICBA) today said it is encouraged that the Consumer Financial Protection Bureau’s (CFPB) final rules establishing new mortgage-servicing rules recognize the sound practices of community bank servicers. By exempting servicers that service 5,000 or fewer mortgage loans, the bureau recognizes that community bank servicers did not engage in the abuses that have roiled the housing market. However, ICBA strongly advocated a servicing threshold of at least 10,000 mortgages. The association will continue reviewing the final rule and looks forward to continuing to work with the CFPB to address community banking concerns with ongoing rulemaking.
“Community banks make sound mortgage loans and work with borrowers on a personal level when they have problems making their payments,” ICBA President and CEO Camden R. Fine said. “In addition to sound underwriting by community banks, this level of service is an important reason why community bank loans have not experienced the high rates of foreclosure as the national servicers have. ICBA is encouraged that its call for the CFPB to exempt these small issuers to minimize their regulatory burdens did not go unnoticed.”
The CFPB exempted small servicers from certain rules requiring servicers to create and maintain new general servicing policies and procedures, to issue monthly statements that would include considerably more information than most community banks already provide, to avoid charging for “force-placed” insurance, and to follow specified loss-mitigation procedures for mortgage loans secured by a borrower’s principal residence, among other guidelines. The bureau noted that these exceptions and adjustments should help reduce burdens for small institutions such as community banks that have strong consumer service safeguards already built into their business models. While ICBA advocated a servicing threshold of 10,000 mortgages, most community banks are already in compliance with these new rules.
Nevertheless, community banks will have to comply with interest-rate adjustment notices for adjustable-rate mortgages. ICBA is particularly concerned that servicers will be required to deliver the notices between 210 and 240 days prior to the first payment due after the first rate adjustment. They also must provide a notice between 60 and 120 days before payment at a new level is due when a rate adjustment causes the payment to change. These requirements will be costly for the community banking industry as well as consumers and could pose compliance challenges.
The Independent Community Bankers of America®, the nation’s voice for more than 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.