Efforts to protect consumers from abusive lending practices should not prohibit responsible, though unconventional, loan products created to meet the diverse needs of consumers, including lower-income borrowers, borrowers in rural and underserved communities, and first-time homebuyers.
ICBA strongly encourages the CFPB to continue to collaborate with ICBA and other stakeholders to take a commonsense approach to amending and improving the TILA/RESPA Integrated Disclosure (TRID) rules, addressing certain tolerances, timelines, and construction-to-permanent lending. ICBA urges the CFPB to address compliance questions through written, authoritative guidance and FAQs.
The CFPB’s “small servicer” exemption limit should be increased from 5,000 loans to the higher of 30,000 loans serviced or $5 billion in total unpaid principal balance of mortgages serviced. Moreover, to be fully beneficial, capital treatment of mortgage servicing assets (MSAs) under Basel III and under the Community Bank Leverage Ratio, for those banks that opt into it, must not discourage retention of MSAs by community banks.
The CFPB should address servicing issues such as the prohibition on initiating foreclosure actions on uncooperative borrowers for loans that are perpetually 90-days delinquent.
Community Banks Are Responsible Lenders. As relationship lenders who underwrite based on firsthand knowledge of their customers and communities and who thrive based on the strength of their reputations, community banks have every incentive to make fair, commonsense, and affordable loans. They do not need prescriptive regulations to compel them to do so.
Small Servicer Exemption Limit Must Be Increased. To preserve the role of community banks in mortgage servicing, where consolidation has clearly harmed borrowers, the CFPB’s small servicer exemption limit should be increased from 5,000 loans to 30,000 loans or a maximum principal balance of $5 billion in mortgages serviced. New regulation has approximately doubled the cost of servicing with a direct impact on the consumer cost of mortgage credit.
Community banks above the 5,000-loan limit have a proven record of strong, personalized servicing and no record of abusive practices. To put the 30,000-loan limit in perspective, the five largest servicers service an average portfolio of over 6.8 million loans each and employ as many as 10,000 people each in their servicing departments. The top five mortgage servicers each have more than $300 billion in unpaid principal balance on mortgages serviced.
Staff Contacts: Ron Haynie, Tim Roy, and Rhonda Thomas-Whitley
Assistant Vice President, Housing Finance Policy
Vice President, Regulatory Counsel