BRUNSWICK, ME – Today, U.S. Senator Angus King (I-Maine) praised a recently announced set of proposals from the Consumer Financial Protection Bureau (CFPB) that would ease mortgage rules for community banks and credit unions. The proposals would make it easier for small banks and credit unions to offer home loans in rural areas. This provision is similar to one included in the RELIEVE Act, a bill that King introduced last Congress with a bipartisan group of his Senate colleagues.

“While they did not cause the financial crisis of 2008, our small banks and credit unions have been unfairly constrained by regulations designed to reign in the big banks that did,” said Senator King. “The CFBP’s proposal will go a long way towards relieving Maine’s community institutions from regulatory constraints – and will allow them to continue to support growth in our local communities.”

Like the RELIEVE Act, a bipartisan bill King introduced in the Senate with Deb Fischer (R-Neb.), Mark Warner (D-Va.), and Jon Tester (D-Mont.), the CFPB’s proposed changes deal with Qualified Mortgages (QM) – which are loans that the borrower will likely be able to repay, and that protect the lender from future lawsuits should the borrower default. Under the current QM rule, which has been in place for a year, small lenders deemed “rural” can exceed certain limits, such as those on a borrower’s debt limit, and still maintain QM status. This exception provides small banks and credit unions flexibility to support local borrowers who may not fit inside a regulatory box. However, the agency’s current definition of “rural” is problematic – the Independent Community Bankers of America (ICBA) estimates that only half of all rural banks actually qualify for the rural exemption, leading to restricted lending in these communities.

The CFPB proposed change to the “rural” definition is similar to a provision in the RELIEVE Act, which would expand the definition of “rural” and increase the number of loans that these lenders are allowed  to originate each year in order to qualify for the Qualified Mortgage exemption. The CFPB will be taking comments on its proposal until March 30, 2015.

Improving the definition of “rural” as it relates to qualified mortgages has been part of King’s larger effort to provide regulatory relief to America’s small financial institutions.  Two other provisions from the RELIEVE Act introduced separately by King and Warner were passed unanimously in the Senate and signed into law by the President in December 2014. Those two provisions create insurance coverage parity between certain bank and credit union accounts and make it easier for bank holding companies and savings and loan holding companies to issue debt and use the proceeds to support the capital levels at the subsidiary bank, thereby allowing the bank to lend more to the communities they serve.

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