What should a community bank do if they decide the 848 pages, 1,500 provisions and 398 rule-making requirements of the Dodd Frank Mortgage Lending Reform make mortgage lending simply not worth it? Often times, community banks carve out a niche, providing lending and service to local individuals who may fall outside normal lending parameters. Dodd Frank mortgage lending reform shines a spotlight on lending at the “margins” and would therefore put community banking practices at risk of heavy regulation.
Community banks are a key part of banking in the U.S. and while Dodd Frank was enacted to eliminate “too big to fail,” in this case, it feels like the mortgage reform will do exactly the opposite. It is likely Dodd Frank mortgage lending reform will cut at the interest revenue business of community banks and force more customers into the “too big” super regional, national and international financial institutions.
If the point of the bill is to protect consumers from predatory lending, perhaps some time should be spent looking at the clientele of local community banks. These are individuals who do not fit nicely inside the standard underwriting practices. This is not to say they are bad customers. They just don’t match with lending regulations. This is the primary market of the community bank. If this market goes away because of heavy handed regulation, how will community banks make ends meet?
Below is an excerpt from the American Bankers Association (ABA) guide on Dodd-Frank and Community Banks.
This legislation represents an unprecedented rewrite of the legal regime covering mortgage finance issues. The reforms are so comprehensive that they will require full-scale transformation of mortgage lending systems and processes. Some banks will evaluate whether to continue to make mortgages because these changes will require burdensome implementation efforts and increased regulatory guidance from federal agencies. Under many provisions, regulators are afforded wide latitude in defining the shape and scope of the rules, so much detail is left undetermined.
In the coming months, banks must prepare for intense regulatory activity affecting mortgages. Banks must carefully plan the resources necessary to confront the workloads that will be required to revamp their mortgage lending operations as these reforms become finalized.
Is there anything that can help withDodd Frank Mortgage Lending Reform?
While MyLoans can’t solve this problem, it can help. MyLoans by Epic River allows community banks to generate patient financing loans at a fair interest rate. The community bank gets a new interest revenue opportunity they have barely touched. The local medical provider gets a better means of collecting payment. The member of the community get a means of financing that is predictable, fair and more likely to fit within their budget.
Drop us a line and we can put you in touch with some other community banks that have been able to supplement their loss of mortgage interest income with patient financing through MyLoans.