Page 18 - 630578_IBAT-Jan-Feb2018

2018 IB AT C ONGRE S S ION A L V IS I T

S T H E 115T H C O N G R E S S C O N T IN U E S I T S W O R K , IBAT remains focused on rea-
sonable changes to statutes that have resulted in significant burdens and expenses for
community banks and their customers. Community banks neither participated in, nor
profited from, the excesses and bad behaviors that precipitated the financial crisis, yet
A are paying a disproportionately high price in attempting to deal with the legislative and
regulatory aftermath. Further, the cumulative effect of the myriad “enhancements” to regulatory oversight has
negatively impacted the ability of community banks to meet the financial needs of their customers and serve as
an economic catalyst in their respective communities.

While there has clearly been incremental—and unique mortgage loans should be a decision made by
much appreciated—progress made in addressing is- the borrower and lender rather than arbitrary, com-
sues of concern, there remains much to be done. We plex and expensive government mandates.
are pleased that the Financial CHOICE Act of 2017
(H.R. 10) has passed the House. Additionally, we are CONSUMER PROTECTION: Community banks spend a
encouraged with the progress of S. 2155, the Economic disproportionate amount of time and resources at-
Growth, Regulatory Relief and Consumer Protection Act, tempting to comply with an ever-increasing level of
which passed out of the Senate Banking Committee regulatory scrutiny in the consumer compliance area.
with bipartisan support and reflects enough Dem- IBAT strongly believes that consumers should be
ocrat co-sponsors to bring to the floor. We strong- treated fairly, but also is of the opinion that the pres-
ly support prompt Senate floor action to move this ent environment is counterproductive and indeed is
bipartisan compromise bill. Further, we are hopeful making credit and banking services less accessible to
that the House will move this bill through the pro- those the government is purporting to protect. Fur-
cess as quickly as possible and without amendments. ther, this is clearly a result of a “one size fits all” reg-
Among the priority issues facing the communi- ulatory framework in which egregious behavior by
ty banking sector in the second session of the 115th some of the larger institutions has created a tremen-
Congress are: dously difficult environment for smaller banks.
Many community banks simply do not have the
TAILORED/RIGHT-SIZED/BIFURCATED REGULATION: IBAT resources to comply with the regulatory expectations
has long pushed for a recognition of the unique busi- in the areas of the Community Reinvestment Act, fair
ness model of community banks and the positive lending and the Home Mortgage Disclosure Act as they
contributions these institutions make in meeting the have evolved. We would submit that a community
needs of small-business borrowers, working with low- bank should have the opportunity to correct a viola-
to moderate-income customers, contributing to their tion of consumer protection law or shortcoming in a
communities and creating jobs and economic activi- compliance management system or protocol prior to
ty. Rather than setting arbitrary asset thresholds, we a formal (and public) order being issued.
encourage Congress to focus on business activities A much more robust level of regulatory scrutiny is
and risk profiles when determining appropriate reg- apparent regarding fair lending. Sadly, the result in
ulatory treatment of various categories of banks. We many circumstances has been that many banks have
urge legislators to move quickly and decisively to al- simply stopped making small loans to individuals,
low community banks to get back to the business of thus pushing these customers into the realm of high-
banking and meeting the needs of their customers. cost and frequently predatory lenders. Regulatory
restrictions on the availability of overdraft programs
MORTGAGE LENDING REFORM: Abuses in the mortgage has further limited opportunities for those seeking
lending and securitization process clearly contributed short term credit.
to the economic crisis. Sadly, a number of community We are particularly concerned that proposed data
banks and their customers have been negatively im- collection on small-business loans mandated by Sec-
pacted, especially in the area of “in-portfolio” mortgag- tion 1071 of the Dodd-Frank Act will potentially have
es, or those kept on the books of the bank rather than a similar effect on small-business lending and should
being sold into the secondary market. IBAT believes be repealed. Community banks control a shrinking
that in-portfolio loans should be granted safe-harbor percentage of the overall banking assets in this coun-
qualified-mortgage status regardless of the qualifica- try (roughly 10 percent), yet make almost half of the
tions of the borrower, payment structure or pricing. small business loans under $1 million. These loans
Further, appraisal and escrow requirements for these do not “fit in a box”; each is unique in its own way.

18 | THE TEXAS INDEPENDENT BANKER