Three-quarters of community bankers surveyed say that new mortgage regulations are keeping them from making more residential mortgage loans in their communities, according to the Independent Community Bankers of America.

“ICBA’s 2014 Community Bank Lending Survey validates what community banks have long predicted—that new restrictions on mortgage lending are reducing much-needed access to mortgage credit for many Americans,” ICBA President and CEO Camden Fine said. “The results show that Congress should act quickly on ICBA’s Plan for Prosperity legislative platform, which would implement common-sense reforms to support continued access to credit without compromising consumer protection or safety and soundness.”

The 2014 Community Bank Lending Survey found that community banks want to continue lending, with most community banks serving as full-service lenders and reporting a positive outlook toward most lending areas.

However, the survey also shows the avalanche of new regulations coming down on community banks from Washington is having a negative impact on their lending and consumer choice.

According to the survey:

  • 73% of community bank respondents said regulatory burdens are preventing them from making more residential mortgage loans
  • Significant percentages of community banks are no longer active in the residential mortgage market, are considering an exit from this line of lending or are exiting the market
  • 78% of respondents reported increasing the number of staff members dedicated to lending compliance over the past five years
  • 44% said they originated fewer first-lien residential mortgage loans in 2014 compared with the year before

The survey also found that 66% of respondents said they do not provide loans that are outside the Consumer Financial Protection Bureau’s Qualified Mortgage definition or would only do so in special cases.

Just 25% of community bankers said they are providing loans that do not fit the CFPB’s QM definition, showing that the new restrictions have shrunk the credit box and taken away lender discretion in granting credit.

Meanwhile, half of all rural banks said they do not qualify for the QM rule’s “rural” exception, which demonstrates that exemptions from the standard are too narrow, limiting access to credit for consumers who need it.

The ICBA's survey results stand in contrast to the Lender Sentiment Survey results released by Fannie Mae on Monday, where 88% of lenders said they expected to increase their mortgage origination business in 2015, and 70% of those surveyed planned to increase their mortgage servicing business.