SMALL-BANK LENDING COULD BE ELEVATED WITH QM ROLLBACK
President Donald Trump has signed a historical lender regulatory-relief bill that has a potential of making a huge impact on the mortgage lending. It is speculated that smaller banks and credit unions are the real winners in this incident.
Most of the credit unions and community banks are now going to have a much liberated condition where they can simply stretch the limits of making loans, set by federal government. This bill named Economic Growth, Regulatory Relief and Consumer Protection Act, or also shortly known as S. 2155, has expanded an exemption to the QM (Qualified Mortgage) rule to the majority of credit unions and community banks. Before this bill, this type of exemption was only eligible for the smallest depository organizations.
Smaller credit unions and banks with assets lower than $10 billion can now stretch aspects of QM rule in making loans. Previously, only the credit unions and banks with less than $2 billion in assets had this springiness. Around 3,800 credit unions in America are going to be eligible for this QM exemption. This change has been welcomed by many analysts as very beneficial for the lending sector.
Even with the qualified exemption, small banks and credit unions are still strictly supervised by the appropriate regulatory boards to ensure that the system remains safe and sound without any riskier moves. Due to this bill, it is expected that more and more small banks and credit unions will increase their mortgage lending activities.
This new flexibility to the qualified mortgage encourages the growth of mortgage lending and this bill is also considered as a measure to avoid any type of financial crisis that happened a few years ago. The federal and state banking regulatory authorities are still intact in supervising the small banks and credit unions.
Conclusion: This is only the beginning of President Trump’s deregulation efforts for financial institutions. The administration has already announced plans to roll back a host of Obama-era regulations, including those put in place by the Consumer Financial Protection Bureau (CFPB). These changes will be an opportunity for smaller banks and credit unions that have been struggling with lending restrictions imposed on them by CFPB rules. It is too soon to tell how these new regulatory relief measures will impact mortgage lending but it seems like small bank lending could see some real growth as a result.