Dodd-Frank putting great pressure on community bankers, expert says

Pat RobertsThe president of the American Bankers Association sent a letter to the Consumer Financial Protection Bureau recommending actions that would provide immediate relief to banks offering mortgage products.

ABA President and CEO Frank Keating wrote to Raj Date, the bureau’s special advisor, as a follow-up from a phone call between the two in early August when Date called Keating to discuss ways that the ABA might best work with the bureau.

In his letter, Keating said that community bankers are so overburdened with regulatory compliance that many are reaching a point where they are seriously questioning the viability of the community bank business model.

Keating's three key suggestions include requesting that the CFPB coordinate the several different mortgage rules under the Dodd-Frank Act that are currently being implemented in a piecemeal process.

Keating also stressed the need for the bureau to conduct a timely review of comments on the important ability-to-repay proposed rules and its qualified mortgage safe harbor.

In addition, the ABA wants clarification on provisions in the Truth in Lending Act rules that govern compensation to mortgage loan originators. The provisions, according to Keating, are very difficult to decipher.

“After much legal analysis of the Federal Reserve Board staff’s formal and informal pronouncements on this rulemaking, our banks are still experiencing a large number of difficulties that remain unresolved and pose dangerous legal uncertainty and conflict,” Keating wrote.

Members in Congress have also been pressuring the administration to relieve the regulatory burden on community banks.

 “The problem is that unlike Too Big to Fail financial institutions, community banks do not have a staff of attorneys or compliance officers to help them navigate wave after wave of new regulations,” Sen. Pat Roberts (R-Kan.) wrote in a letter to President Obama in April. “By one estimate, for the typical small bank, more than one out of every four dollars of operating expense is used to pay for the cost of complying with government regulations."

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