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  • 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 for community banks to use the GSEs and thereby reduce access to credit in rural or small-town communities.

  • ICBA’s principles include:

    • Underwriting and property appraisal guidelines and policies should not discriminate against properties and borrowers in rural or small-town markets.

    • Appraisal requirements need to be flexible to accommodate the unique nature of rural and small-town properties and should not exacerbate the current shortage of appraisers in these markets or drive higher costs for residential appraisals.

    • Mortgage servicing requirements from the GSEs should be tailored to better fit the community bank cost structure and business model.

    • Quality control/loan manufacturing policies and requirements that are overly complex add considerable cost to the process, making it harder for smaller lenders to sell directly to the GSEs.


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 at a reasonable price. In particular, as the GSEs update the residential appraisal forms and the information they collect ICBA is concerned that increasing the amount of data points will make appraisals more expensive and difficult to obtain, especially in outlying areas. ICBA will continue to work with the GSEs, the FHFA, and the banking agencies to develop alternatives to standard residential property appraisals, which should improve access to credit in rural and small-town markets.

Servicing. Community bank mortgage loan servicing is based on close ties to customers and communities. The cost to service a mortgage has doubled since the financial crisis, forcing many community banks to exit the mortgage servicing business. The GSEs must structure their servicing guidelines to avoid this outcome.

Servicing helps community banks remain competitive in the mortgage origination business. Any changes to mortgage servicing standards or compensation should not promote additional consolidation of the mortgage servicing business in the largest aggregators.

Staff Contact: Ron Haynie and Tim Roy

Staff Contacts

Ron Haynie

Senior Vice President, Housing Finance Policy

Washington, DC



Tim Roy

Assistant Vice President, Housing Finance Policy

Washington, DC


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