Community Bankers Association of Illinois

CBAI Applauds Withdrawal of HUD Proposed Rule
February 14, 2012

A late October CBAI comment letter, and community banker responses to an Action Alert, have prompted the Department of Housing and Urban Development (HUD) to withdraw their Proposed Rule to enable Farm Credit System (FCS) lenders to participate in Federal Housing Administration (FHA) mortgage insurance programs. Read Comment Letter

The HUD Proposed Rule was unnecessary and counter productive. Community banks already successfully serve rural communities and will continue to do so as the economy recovers. The Proposed Rule would undermine community banks at the expense of taxpayer-subsidized FCS lenders. We also opposed the Proposed Rule because Congress through legislation, not HUD through rulemaking, should be responsible for approving any expansion of FCS powers.

FCS lenders unfairly compete with community banks by using their government-backed status and preferred tax treatment to operate. Many FCS offices have used these unfair advantages to cherry-pick the most desirable credits and gain market share which constitutes an abuse of the original Congressional intent for the FCS.

In addition to urging the withdrawal of the Proposed Rule, we encouraged HUD to work with community banks to remove the compliance and control requirements that serve as barriers to greater utilization of FHA programs by community banks.

Thank you to all of our members who responded to the CBAI Action Alert.

Your voice helped make the difference in convincing HUD to withdraw this misguided proposal!

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