No More Mortgages from Local Lenders

Barney Frank is at it again.  Once more, in the guise of looking as if Congress is doing something, they are attempting to pass an incredibly anti-consumer piece of legislation.  The proposed  Financial Stability Improvement Act contains a section called Subtitle F.  Under this provision, all lenders would be required to retain 10% of all money they lend out in mortgages.  For example, if a lender has lent out $100 million dollars in mortgages, it must have on hand $10 million.  Theory is that this way, if it loans go bad, it will have money to cover it.  Sounds reasonable?  Think again.

Small lenders such as community banks and credit union do not have the financial assets to cover this 10% retention.  today these lending institutions provide consumers with safe and affordable mortgage products, local market knowledge and high quality personal service.  These local institutions represent about 40% of all home mortgage originations.  This provision will drive them out of the mortgage business.  Who would be left?  The 5 large banks that have enough capital to meet this 10% requirement.  You know who they are, Chase, Bank of America, Citi, etc. The only reason these banks could meet these requirements is they received TARP money from the government. 

Your buyer would only have the choice of going to one of these large banks to get a mortgage.  What a disaster.  There would no choice and no competition for the consumer.  What happened to "Too big to fail?"  All real estate industry professionals must contact their representatives in Congress and voice their opposition to this part of bill.  Otherwise your local community lender might be a thing of the past.