What should a community bank do if they decide the 848 pages, 1,500 provisions and 398 rule-making requirements of the Dodd Frank Mortgage Lending Reform make mortgage lending simply not worth it? Often times, community banks carve out a niche, providing lending and service to local individuals who may fall outside normal lending parameters. Dodd Frank mortgage lending reform shines a spotlight on lending at the "margins" and would therefore put community banking practices at risk of heavy regulation.
Community banks are a key part of banking in the U.S. and while Dodd Frank was enacted to eliminate "too big to fail," in this case, it feels like the mortgage reform will do exactly the opposite. It is likely Dodd Frank mortgage lending reform will cut at the interest revenue business of community banks and force more customers into the "too big" super regional, national and international financial institutions.
If the point of the bill is to protect consumers from predatory lending, perhaps some time should be spent looking at the clientele of local community banks. These are individuals who do not fit nicely inside the standard underwriting practices. This is not to say they are bad customers. They just don't match with lending regulations. This is the primary market of the community bank. If this market goes away because of heavy handed regulation, how will community banks make ends meet?
Below is an excerpt from the American Bankers Association (ABA) guide on Dodd-Frank and Community Banks.
This legislation represents an unprecedented rewrite of the legal regime covering mortgage finance issues. The reforms are so comprehensive that they will require full-scale transformation of mortgage lending systems and processes. Some banks will evaluate whether to continue to make mortgages because these changes will require burdensome implementation efforts and increased regulatory guidance from federal agencies. Under many provisions, regulators are afforded wide latitude in defining the shape and scope of the rules, so much detail is left undetermined.
In the coming months, banks must prepare for intense regulatory activity affecting mortgages. Banks must carefully plan the resources necessary to confront the workloads that will be required to revamp their mortgage lending operations as these reforms become finalized.
Is there anything that can help with Dodd Frank Mortgage Lending Reform?
While MyLoans™ can't solve this problem, it can help. MyLoans™ by Epic River allows community banks to generate patient financing loans at a fair interest rate. The community bank gets a new interest revenue opportunity they have barely touched. The local medical provider gets a better means of collecting payment. The member of the community get a means of financing that is predictable, fair and more likely to fit within their budget.
Drop us a line, and we can put you in touch with some other community banks that have been able to supplement their loss of mortgage interest income with patient financing through MyLoans™.
About MyLoans™
By providing patients with fast access to medical loans at a fair and unchanging interest rate, the MyLoans™ software by Epic River enables financial institutions to ease the financial stress of health care through collaboration with medical providers. Not only can medical providers offer a federally insured and fully regulated patient financing between banks and patients for medical care needs, but doctors and hospitals alike can finally get immediate funding of their patient’s outstanding balances. Additionally, financial institutions gain new customers and interest income with little administrative overhead in exchange for servicing the loan. For more information, visit www.myloans.co.
About Epic River, LLC
Since its inception in 2005, Epic River has been providing high quality software services aimed at solving process-intensive problems. With a focus on high quality and rapid delivery, Epic River’s methodology accelerates the process of innovation while keeping a firm grasp on the business case behind the application, enabling our partners to grow their market leadership. The company’s unique approach to the agile methodology and user experience ensures both parties work closely together every step of the way. Whether you’re looking to expand into new technologies or markets, need a custom internal tool, assistance with architecture, or simply need someone you can trust to make technology decisions, Epic River is at your service. For more information, visit www.epicriver.com.
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