Small banks bruised by new mortgage regulations, giving edge to mega-banks

Daily Business News\Jim_Schipper,_Iowa's_banking_superintendent_USA_Today posted Manufactured Home Marketing Sales Management Daily Business News USAToday reports compliance officer Alesia Harlan’s concerns about 300 pages of notices, forms and tax documents for a single home loan, double the tree-killing load prior to Dodd-Frank’s passage. 455 home loans in 2010 created 2 months of work for Harlan, at modest City State Bank in Norwalk, Iowa. “I’ve yet to see the benefit to the customer,” said Harlan. “It’s highly technical and confusing for the borrower.” The 2300 page Dodd-Frank bill creating the Consumer Financial Protection Bureau (CFPB) is expected by some to result in 5000 pages of regulations. “Bank of America can fill a skyscraper with attorneys to comply with all the rules and regulations, but a community bank can’t do that,” said Jim Schipper, Iowa’s banking superintendent. “I know some bankers that are probably just going to quit making mortgage loans. I mean, what’s the point?” Regulations are so complex and costly to administer, many expect it to hasten the trend towards the very ‘banks to big to fail’ that the bill was supposed to protect consumers against. In a speech in Des Moines Iowa last June, Thomas Hoenig, outgoing president of the Kansas City Federal Reserve Bank said “It’s such a complicated piece of legislation, it will be to the benefit of the largest institutions, not because they want it to be, but because it forces consolidation, and that’s a tragedy for this country.” “It’s very much a concern for the typical bank in Texas,” said John Heasley, vice president of the Texas Bankers Association in Austin. “They’re already spending extensive funds for compliance costs, and Dodd-Frank is viewed as adding insult to injury.” “It almost looks as if the ‘too big to fail’ banks got a free ride,” Heasley said. “The banks in Texas, who had nothing to do with the origination of toxic mortgages, securitization of those mortgages, or the sale of credit default swaps, are being made to pay for the sins of others.”

(photo credit: USA Today)

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