Opportunity Is Knocking

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By Jack Hartings, Chairman of ICBA

Opportunity Is Knocking

When I speak with community bankers around the country about regulations, the words I usually hear are frustrated, overburdened, pile- on, crushing and no common sense. While I completely agree with those, I want to add one more word—opportunity.

Simply put, community bankers don’t like it when regulations get in our way of taking care of our customers and communities. We and our customers are frustrated by the alphabet soup of regulations we must deal with.

My staff, for example, spends an enormous amount of time on our Bank Secrecy Act and Customer Identification Program, even though we know our customers extremely well. In fact, we know many of their family members.

Congress has introduced more than 25 bills for community bank regulatory relief.

Then there are the new mortgage rules that pertain to Ability-To-Repay, Qualified Mortgage and TILA-RESPA Integrated Disclosure rules. The Consumer Financial Protection Bureau has decided no customer with over a 43 percent debt-to-income ratio should be considered for a more affordable QM loan. Yet nearly 20 percent of the mortgages my bank originates and holds in portfolio exceed that ratio. So we have had to completely rewrite our policies and procedures to continue serving these customers, most of whom are small-business owners or people on fixed incomes.

I give the CFPB credit for creating a community bank exemption for loans held in portfolio, but the exception falls short of covering all community banks that inherently would never offer their customers harmful products.

Then there’s the TRID rule. Our software vendors have all struggled to allow our banks to be ready by the rule’s Oct. 3 starting date. I also don’t ever remember a regulatory change this major that was implemented like this one, where one day a switch is flipped on and we have to be 100 percent compliant, with no phase-in.

Also, the rule’s three-day delay due to loan closing disclosures will increase my customer’s rates by making it nearly impossible to close a mortgage within 30 days of taking an application. In the past, most community banks like mine could use the 30-day forward-rate commitment to obtain the best possible interest rates for our customers from the government-sponsored enterprises. But now we will need to use the 45-day or 60-day rate commitments that have the customer paying 1/8 to 1/4 percent higher in rates for the same loan.

So where does opportunity fit with regulatory burden?

We have an opportunity to change the regulatory wind direction against us. Our industry defines Main Street. Legislators and regulators know community bankers are the “good guys.” Our sterling reputation, along with our unrelenting advocacy for doing what’s right, has allowed ICBA and community bankers to achieve important successes like asset-based FDIC assessments, tiered QM rules, Basel III carve outs and many others.

Congress has introduced more than 25 bills for community bank regulatory relief, but lawmakers need our help to push them over the goal line. ICBA has teed up many of these bills, but everyone in our industry must advocate for them. Let’s not squander this opportunity. Stand up. Step up. Speak up.


Jack Hartings is president and CEO of The People’s Bank Co. in Coldwater, Ohio.

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