St Casimirs Mortgage Minute

Duke: Abandon One-Size-Fits-All Mortgage Rules




Policymakers should reassess regulations that make a traditional banking service -- namely mortgage lending -- too complicated or expensive for community banks to offer, Federal Reserve Governor Betsy Duke said in a speech last week.

Duke reviewed evidence indicating that community banks are important to the mortgage market and mortgage lending is important to their balance sheets and profitability. She also noted that community banks didn’t engage in many of the practices that Dodd-Frank Act rules seek to address, and that they lack to resources to effectively comply with such rules.

“[I] am convinced that the best course for policymakers would be to abandon efforts for a one-size-fits-all approach to mortgage lending,” said Duke, a former community banker and chairman of ABA. “I think an argument can be made that it is appropriate to establish a separate, simpler regulatory structure to cover such lending.”

“Such a regime should still establish appropriate safeguards to protect consumers, but it should do so in a way that recognizes the characteristics of community bank lending, perhaps by focusing on appropriate disclosures and relying on regular on-site supervision to test for appropriate underwriting and loan structuring,” Duke added

---ABA Daily Newsbytes