An Unexpected Revolt?

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Consumers feel today’s overregulation—and they aren’t happy about it

By Mitch Ashlock

Arecent National Mortgage News article pointed out that “consumers complain when lenders ask for information, even suggesting such requests are a violation of their privacy.” Having worked in banking for nearly 23 years and having been preceded in executive leadership by my father and grandfather at our family’s community bank, I have repeatedly heard similar statements from our mortgage customers.

From my own experience, the reams of complex and confusing paperwork homebuyers must sign—and be bound by—to obtain a home mortgage continually astonishes them. It upsets them, too. Our customers at First Federal Savings & Loan Bank tell us such question-and-answer sessions—mainly to extract information that most lenders originating secondary-market mortgages must obtain to sell a mortgage in the secondary market and avoid the possibility of creating a “buy back” loan years down the road—make consumers feel interrogated, not protected, during the mortgage approval process.

Fortunately, First Federal Savings & Loan Bank (in operation since 1923) has never sold any of our mortgage loans to the secondary market or anyone else. Because of that, many of our customers especially appreciate knowing whom they’re dealing with and knowing where their loan will remain into the future.

Because we keep all of our mortgages in a portfolio, we also can avoid asking our customers for a considerable amount of information, documentation and detailed explanations. A lot of our loan customers see how today’s environment of overregulation affects them directly in mainly two ways: 1) all of the extra disclosure forms they need to sign at a loan closing, and 2) the waiting times that are required before a loan can be closed.

To say that we’re overregulated is a huge understatement! I used to (half jokingly) tell our customers, “If it were up to us, we could close your loan with just three pieces of paper: 1) the closing statement, 2) the note and 3) the mortgage.” Our customers are increasingly seeing and feeling firsthand how intrusive overregulation, however well intended, is interfering with and hindering and not helping their financial lives.

I know that ICBA and community bankers have been and are working very hard to make this point with the regulatory agencies and with Congress while lobbying for meaningful regulatory relief. But we have a huge mountain to climb in attempting to undo or clean up the muddy water of the past, which is mostly prompted by “the big boys” or a few bad, now out-of-business mortgage originators. But today’s regulations have simply gone too far, and our customers on Main Street are recognizing that the source of the problem is emanating from Washington. They’re learning how policymakers, for all practical purposes, are more rigidly dictating to lenders on what kinds of mortgages we can and can’t make (i.e., only below 43 percent debt-to-income ratios). They are discovering how regulations are restricting how and when we can close loans (i.e., only after wading through a mountain of confusing “simplified” TRID-imposed disclosure documents or after a seven-business-day period from providing disclosures and after a three-business-day review prior to closing). They are learning how regulations are sometimes raising the interest rates we must charge (i.e., higher-priced mortgage regulations, before additional disclosures or other requirements apply).

According to a poll by the U.S. Consumer Coalition, “71 percent of people agree that it’s a borrower’s responsibility to determine whether to take out a loan or mortgage with ‘unfavorable terms’ as long as those terms are presented clearly.” And I would add that in our 92-year history, First Federal Savings has never had a customer complaint filed against us to the regulators.

I was very encouraged to read recently that House Financial Services Committee Chairman Jeb Hensarling (R-Texas) plans to hold congressional hearings to consider whether today’s meddlesome, convoluted briar patch of financial regulations are providing more stability and are making the United States more prosperous. Far too many policymakers in Washington still don’t seem to realize that many customers say those regulations have damaged our economic growth, family finances and financial freedom. If they did, they would address the problem more urgently.

So I wonder where the regulatory review hearings will be held to accommodate 6,419 community bankers and our country’s 326 million citizens. I say policymakers beware. It’s not just community bankers. Consumers, who also happen to be voters, are understanding where all of this ridiculously excessive financial regulation is coming from, and they aren’t happy about it.


Mitch Ashlock (mashlock@firstfederalolathe.com) is president and CEO of First Federal Savings & Loan Bank in Olathe, Kan.

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