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The qualified mortgage rule remains the big unknown in the mortgage industry just three months before it's scheduled to become law of the land. We speak with officers of the New York Association of Mortgage Brokers about how they're prepping for this brave new world.
October 18 -
Researchers at a Federal Reserve conference in St. Louis provided data backing small bankers' concerns about regulation and competition, though it is unclear if the findings will led to meaningful change.
October 4 -
The strength of America's financial system is a result of the diversity of its players, but that diversity wont survive if our nation continues down the path of one-size-fits-all regulatory reform.
August 28 -
Policymakers clearly don't want to harm small banks, but it's difficult to see how they can insulate us from the macroeconomic effects of some of the proposals being considered.
April 15
NEW ORLEANS Bankers must focus, now more than ever, on taking care of business.
That is the mantra of Jeff Plagge, the president and chief executive of Northwest Financial in Arnolds Park, Iowa, and the
Regulation remains a big industry challenge, but Plagge wants to make sure bankers avoid getting too distracted by rulemaking. Doing so would be a disservice to clients, he says.
Still, Plagge whose bank has assets of $1.5 billion pledges to lobby hard for adjustments to Dodd-Frank Act regulations and rules from the Consumer Financial Protection Bureau, particularly those affecting mortgages and payments.
Here is an edited excerpt of that interview.
What are the biggest issues facing the banking industry? What are your priorities?
Jeff Plagge: Our overarching theme is getting back to the business of banking. While we have all these new regulations, an economy that's bouncing up and down and politics at its finest, banks have to bust through the wall if we're truly going to grow this economy. I think that has already been occurring, but the tone is still all about rules, regulation and politics. This is about taking an internal look at ourselves to see if we're ready to push forward.
On the regulatory front, I think everybody has come to a conclusion that nobody is up for the total repeal of Dodd-Frank or [the qualified mortgage rule]. We're down now to tweaking and refining what's out there. One area where Congress, regulators and banks can be absolutely in full agreement is that we want the end product to work. We need to ask ourselves if we are meeting the objectives and, if not, is everybody willing to have a discussion about how me might tweak them.
Folks in Congress want it to work and regulators, quite frankly, have the same challenges that most of us in the banking industry do. They're trying to interpret and apply the rules like we are. And I would say that the tone has dramatically changed over the past year.
How do banks 'bust through the wall'?
It is inherent in our nature. We are all born to be compliant with rules. We're so accustomed to oversight and regulation. It is different depending on what type of bank you're in. In a community bank we rely a lot on vendor partners and ancillary products. We work with them, and we count on them. Vendor management is a huge issue today from a regulatory standpoint.
Picking vendors with staying power and the [right] capabilities is important. It is the top threat of the QM rule can those vendors be ready? Even if they can, there's a ton of staff training that has to go on. Even if they can, there's a ton of staff training that has to go on. We've been pushing for a little bit of an extension. [CFPB Director Richard]
If the rules are a little confusing, and we don't have time to train staff, banks like ours that make 3,000 to 4,000 mortgages a year could be 1,000 mortgages into it before everything gets settled. We may have made a lot of regulatory mistakes that will then have to be corrected. It would have an impact on us and our customers. There will be some high hills to climb with the way these things are coming out.
Are regulators listening?
All of them have
There are things like call reports that keep getting more and more burdensome. There are a lot of things with payment remittance rules that have changed. So [the key involves] getting around the table with regulators to say here are 10 examples where rules are overly burdensome or are not accomplishing what was intended. Let's start putting some meat on the bone in this discussion.
They are all sincerely saying the right things. It is the action we are trying to pursue. I like the tone. We'll see now about the details.
Is there concern that rules are limiting banks' flexibility or limiting access to credit?
It is one thing I hear a lot. The more you standardize, the more you commoditize the industry. I don't think it is healthy in general, whether on the payments side or the deposits side. In the broad scope, there's one of my concerns about having things too standardized.
In the QM rules, certainly you standardize a big chunk of the mortgage industry by defining what is a QM loan. Part of the discussion involves the
The concern we've been voicing involves that non-QM box and how it could constrict credit when exactly the opposite is needed now. The worst thing we could do is go backwards when we're seeing a recovery. Hopefully, we have open communication lines to have the discussion about where tweaks are needed.
Northwest recently merged two of its banks. Why?
The geographies of those banks started overlapping significantly because of one of the bank's expansion. So we finally decided that between that, and the cost side of the equation, it was time to put those banks together. There's a lot of that going on. We elected to leave the bank in southern Iowa alone because it has been a very profitable bank, and we felt there was no need to disturb it.
What are your views on earnings and mortgage volume?
If there's a drop in the third-quarter results, I wouldn't expect it to be huge, at least in core operations. But overall the challenges are there even though the economy seems to be moving in the right direction.
The mortgage industry is certainly smaller than it was six month ago when the refi market was at a high. There's no question that mortgage income is going to be down, but we're seeing a pretty healthy purchase market and more construction. Yes, volume is down, but the mortgage market is healthy long term. That's a good thing.
