WASHINGTON (4/4/13)--The National Farmers Union (NFU), with input from the Credit Union Association of the Dakotas, is urging Congress to create a mortgage law exemption for locally controlled financial institutions serving rural and underserved areas, to provide relief from excessive regulations aimed at Wall Street banks.
Credit unions were instrumental in bringing the resolution to state-level Farmers Union organizations in North Dakota and South Dakota, which passed it as part of their policy making and took it to NFU, a Washington, D.C.-based farm organization similar to the American Farm Bureau except it focuses on cooperatives and family farmers.
NFU passed a Special Order of Business during its annual meeting in March to "lift it out [among other policy issues] to the eyes of the delegates as one issue that is particularly important," said NFU President Roger Johnson.
"The issue gets to local lending and is a function of what is happening with Dodd-Frank regulations," Johnson told News Now. NFU "supported the act to reign in big banks that caused the big collapse. In the process of emerging the net, cast to deal with big banks that manipulated mortgages and led to the bubble, some rules are indiscriminately clamping down on small lenders and impacting credit unions."
Credit unions originate home mortgages, "but that was never where the problem was," he said, adding, national regulations should "contain exceptions for small lenders."
Local farmers unions and credit unions in North Dakota have had a strong relationship for many years, and NFU would "be delighted to work with" credit unions, he said.
"This is an important issue," CUAD President/CEO Robbie Thompson, told News Now, noting that the Credit Union National Association worked with CUAD in drafting the resolution language. "It's a significant development, because entities outside the credit union industry are concerned about overregulation of financial institutions and small businesses in small communities."
The resolution started with North Dakota credit unions concerned that people could not get credit in rural areas. Large credit unions that serve small communities can "afford to do compliance," said Thompson. "But small credit unions will have to make decisions about whether they can offer loans."
Lisbon (N.D.) Farmers Union CU, with nearly $5 million in assets, used to make one to four home-owner mortgage loans a year, said Daniel Wagner, chief financial officer and manager. Wagner helped bring the issue to CUAD's attention and was instrumental in getting the NFU resolution. "We've been regulated out of that type of loan," he said.
The credit union, a five-star rated credit union in Bauer Financial quarterly reports for years, discontinued the loans because it worried about making a mistake. A $10,000 penalty for a $30,000 mortgage loan is significant for a small asset credit union. The credit union, which has 1.5 employees, was told it needed three full-time compliance officers to ensure compliance with regulations.
It had to turn down two families for $30,000 mortgage loans last year. "Big banks don't run to make these loans, so these families will have a hard time getting financed," he said.
Although regulators such as the National Credit Union Administration and the Consumer Financial Protection Bureau recently took actions regarding rural institutions and mortgage exemptions, "we'd like them to be expanded," said CUAD's Thompson.
"This presents an opportunity to bring other groups not just in the credit union industry to understand that excessive regulations can harm rural communities and access to credit," Thompson said. "Hopefully this is a beginning."
NFU's Special Order noted excessive regulations "had the unintended consequences of discouraging home lending in rural and underserved areas by locally owned and/or locally controlled financial institutions." It called for Congress to create exemptions "from recently enacted laws and rules regarding mortgage escrow for high-interest loans, mortgage insurance requirements, appraisal requirements, mortgage licensing and registration, and ability to pay/qualifying mortgages."