Mortgage lenders and others told the House Financial Services Subcommittee on Financial Institutions and Consumer Credit that the mortgage industry needs regulatory relief, or else borrowers – especially lower income and minority borrowers – will continue to be left out.
House Financial Services Committee Chairman Jeb Hensarling, R-Texas, agreed.
“I would say of all the priorities of our committee I know of not one that is more urgent than providing some regulatory relief for our community financial institutions. It is not an exaggeration to say that they are literally withering on the vine. We are losing more than one a day and they are not perishing of natural causes,” he said in a prepared statement Wednesday morning. “The sheer weight, volume, cost, complexity and uncertainty of federal regulation is a burden that is killing them off.
“It’s not an exaggeration to say that every single week we hear from another financial institution that is having trouble meeting the needs of their customers. I have one message here from a bank in Arkansas that says due to the Qualified Mortgage rule that they have had to cease funding mobile homes ‘which have long been a source of homeownership for low to moderate income consumers in our markets,’” he said.
Testifying before the subcommittee, Patriot Federal Credit Union President and CEO Peggy Bosma-LaMascus, speaking for the National Association of Federal Credit Unions, said that the regulatory burden is the top challenge facing all credit unions.
She highlighted a 2012 NAFCU survey of the association’s members that found 94% of respondents had seen their compliance burdens increase since the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010.
“Many credit unions find themselves in the same situation, as a March 2013 survey of NAFCU members found that nearly 27% had increased their full-time equivalents (FTEs) for compliance personnel in 2013, as compared to 2012,” LaMascus said. “That same survey found that over 70 percent of respondents have had non-compliance staff members take on compliance-related duties due to the increasing regulatory burden.”
Rep. Randy Neugebauer, R-Texas, chairman of the subcommittee, echoed her testimony.
“Today, I meet with community bankers and lenders who can’t make loans they once did. I speak with those dreaming of owning their own business, who now can’t access the financial products that helped others get their start,” he said. “I hear from constituents in the Texas 19th District who have difficulty getting a mortgage. Others who are fearful that financial products they rely on to make ends meet will soon go away.
“A study from the Mercatus Center found that some institutions simply stopped offering residential mortgages, home equity lines of credit, overdraft protection, and credit cards to their customers. Consumer loans, and in particular mortgages, have been the hardest hit by many of the new regulatory approaches,” he said. “Many lenders, faced with regulatory risk, have simply stopped making loans or removed all discretion from the loan process.”