As published in Scotsman Guide's Residential Edition, October 2011.
The Independent Community Bankers of America (ICBA) represents almost 5,000 community banks nationwide. Its for-profit subsidiary ICBA Mortgage helps members grow their mortgage products and profits, assists with regulatory compliance, and strives to keep small banks competitive with national lenders. Ron Haynie, president and CEO of ICBA Mortgage, discusses the advantages small banks provide and their relationship with mortgage brokers, as well as the challenges of today’s market.
What do we mean when we talk about independent community banks? When you’re talking about a community bank, it’s a small organization. Many times, it’s probably the primary financial institution in a small town. Our average member has assets of around $250 million. A lot of [our members] are in towns with under 20,000 people, but many are in the suburbs and cities, as well.
What challenges do they face? [They have] some of the same challenges folks in the bigger cities have — being able to get loans processed and underwritten, being able to deal with [regulatory] changes and tightening underwriting guidelines. Also, in many rural areas, appraisals are more challenging … but people in small towns want the same mortgage products as people living in bigger cities.
What sets community banks apart from national banks? Lending is a local business — mortgage lending, especially. If you look at the loan performance and the losses that community banks have sustained versus the large national aggregators, you’ll see that it’s considerably less. There’s a reason for that. It’s because community banks know who they do business with. They know what’s going on as far as the local economy, so they’re able to respond quicker. One of the reasons we’ve had the problems we’ve had is the mortgage business became so nationalized.
If you go back 10 or 15 years, you had community banks doing a lot more mortgage lending. A lot of them serviced their loans locally. Those things have changed because it’s becoming more expensive.
Do your members work with mortgage brokers? Do they share common concerns? We do have some member banks that own mortgage-banking companies. Maybe in some cases, they act as a mortgage broker. But for the most part, our members and mortgage brokers end up being competitors. [Competition aside], we’re all concerned about the future of Fannie Mae and Freddie Mac, and we’re certainly all concerned about qualified residential mortgages (QRMs).
What concerns you most about the QRM proposal? That it not be overly prescriptive and hinder community banks’ ability to do portfolio lending. One of the great things that community banks do is tailor loan transactions to borrowers’ needs and financial situations. We don’t want to lose the ability to do that.
Darrick Meneken is a former associate editor at Scotsman Guide. For questions about this article, e-mail firstname.lastname@example.org.