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THE AMERICAN DREAM: A REGULATORY NIGHTMARE, SAYS IBAA

 THE AMERICAN DREAM: A REGULATORY NIGHTMARE, SAYS IBAA
 WASHINGTON, July 21 /PRNewswire/ -- Buying a house used to be the American dream, but for bankers and customers it could become a regulatory nightmare, Independent Bankers Association of America (IBAA) Chairman David Ballweg warned today.
 Ballweg, testifying before the Senate Government Affairs Subcommittee on Government Information and Regulation, noted that recently proposed regulations implementing Section 304 of the FDIC Improvement Act (FDICIA) "will dry up housing finance in the United States. On this point, affected lenders and homebuilders agree."
 Section 304 requires the bank regulatory agencies to adopt uniform regulations for real estate loans. "The regulatory agencies have interpreted this by proposing highly restrictive loan-to-value criteria -- lending ratios that will hamstring lenders from making real estate loans," said Ballweg, president of Community State Bank of Union Grove, Wisconsin.
 Ballweg, testifying on behalf of the Independent Community Bankers Association of Wisconsin, said the regulatory agencies have reasoned that higher loan-to-value ratios suggest that higher risks are sustained by the lender. "Credit quality and other qualitative measures appear ancillary to these absolute ratios," he noted.
 Specifically in housing, the regulations proposed by the agencies would:
 -- Limit construction of multi-family projects, since they would be in the same category as commercial construction projects.
 -- Subject residential loans to the availability of private mortgage insurance, a very expensive credit enhancement for single-family borrowers.
 -- Ignore special programs, such as assisted housing initiatives, unless they meet a specific low-income, economically disadvantaged definition.
 Ballweg noted that early discussions among industry and regulatory agencies have raised an approach to exempt "well- capitalized" banks from the proposed guidelines. Currently, about 30 percent of the nation's banks and 25 percent of the thrifts are considered to be "well-capitalized."
 "The problem with this unfortunate provision is that it will shut the door to housing and real estate lending except for well- capitalized institutions," Ballweg said. "Adequately capitalized institutions need not apply."
 He noted that S. 2967, the Credit Availability and Regulatory Relief Act of 1992, would soften the blow of the regulatory proposal by extending its effective date. "Outright repeal would be even more welcome," Ballweg added.
 IBAA is the only national trade association that exclusively represents the interests of the nation's community banks.
 -0- 7/22/92
 /CONTACT: Gary J. Kohn, legislative counsel, Independent Bankers Association of America, 202-659-8111/ CO: Independent Bankers Association of America ST: District of Columbia IN: FIN SU: LEG


KD -- DC007 -- 1772 07/22/92 10:21 EDT
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Publication:PR Newswire
Date:Jul 22, 1992
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