Economic Growth, Regulatory Relief, and Consumer Protection Act

Floor Speech

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Mr. HOEVEN. Mr. President, I want to associate myself with the comments of the esteemed Senator from Wyoming. I think he described very well the extremely positive impact that tax relief is having on our country, on economic growth, on job creation, and on higher wages and incomes for hard-working Americans.

I rise today, however, to talk about the Economic Growth, Regulatory Relief, and Consumer Protection Act and the important reforms we are making to spur economic development, facilitate more lending, and reduce burdensome regulations on our community banks and credit unions.

The Dodd-Frank Act was enacted in 2010 following the financial crisis in an attempt to reduce systemic risks the financial sector posed to the economy. This far-reaching law touched every aspect of the financial system, including many small community banks and credit unions around the country and in my home State of North Dakota and across this Nation, in North Carolina and in every State in the Union. These community banks and credit unions are not what pose the systemic risks that Dodd-Frank was passed to address.

At almost 850 pages long, Dodd-Frank required more than 10 regulatory agencies to write almost 400 new rules, which added more than 27,000 new Federal restrictions on American businesses. Think about that regulatory burden--more than 27,000 new Federal restrictions on American businesses.

Compliance costs to implement these Dodd-Frank rules have exceeded $36 billion--I repeat, $36 billion--which is ultimately passed on to consumers. It required nearly 73 million paperwork hours. In fact, agencies were still writing Dodd-Frank regulations after the law was passed. These costs hit small banks and credit unions especially hard, harming the driving forces of economic growth in rural areas and in our underserved areas. These financial institutions provide critical funding for credit for families and small businesses, especially in rural areas and in underserved areas. Rural States particularly feel that impact, like my home State of North Dakota.

Because of their small size, community banks and credit unions have a more difficult time complying with excessively complex reporting and paperwork requirements. Compliance costs have hastened bank closures in small towns, leading to a growing number of places with no bank branches--meaning, not having financial services for consumers.

Nationwide, more than one in five U.S. banks have disappeared; that is more than 1,700 institutions--or more than one small bank or financial institution every business day--that have shut down since Dodd-Frank was enacted. That means less access to financial services for consumers across this country, particularly those who don't live in our large urban areas.

Since Dodd-Frank was signed into law, North Dakota has lost over one- fifth of its credit unions, with the number of credit unions in North Dakota declining from 47 in 2010 to 35 today. The number of community banks in North Dakota similarly dropped from 90 in 2010 to 74 today. These institutions have been forced to merge and consolidate due to the overly burdensome regulatory compliance costs associated with Dodd- Frank.

The ultimate loser, of course, from these increased regulations, compliance costs, and the subsequent consolidation ends up being the very consumer that Dodd-Frank was intended to protect. Whether you are shopping for a loan to fund an innovative startup business, operating capital for your family farm, or seeking a mortgage to purchase your first home, fewer banks and fewer credit unions means fewer options for consumers.

In North Dakota and in rural communities Nationwide, our community banks and credit unions serve just that--the communities. They serve their local communities. They are not only savings and lending institutions for hard-working neighbors, local businesses, farmers, ranchers, and community members, but they are willing to work with borrowers facing circumstances unique to their rural community. They know their customer. They know their community. They know their service area.

Rural community banks and credit unions typically make loans that don't fit the standard mortgage mold. Properties that are not cookie- cutter residential properties are very common in rural markets. Rural lenders tend to use their knowledge of the market and the customer to structure loans that work for both the borrower and the bank. In other words, they make a loan fit the customer, rather than trying to make the customer fit a one-size-fits-all loan program with too much regulation. That might require using multiple pieces of property as collateral for the loan or utilizing a short-term loan to assist with a renovation that is paid off with the sale of a crop.

Documenting assets and cash to close a loan may look very different. For example, livestock in a feedlot waiting for sale or crops ready for harvest or in storage silos may substitute for cash in the bank that would typically get a borrower to qualify for a loan under the standardized approach where one size is supposed to fit everyone.

The fundamental purpose of community banks and credit unions is to serve their local communities. In North Dakota, they do this by forging personal relationships with the small businesses, farmers and ranchers, and individuals in their communities. By knowing their customers, they are able to offer products tailored to each individual who comes into the bank.

Dodd-Frank undermines this fundamental purpose by forcing banks and credit unions to fit their customers into a one-size-fits-all mortgage lending product called ``qualified mortgages.'' While this may work for urban and suburban lenders who sell their mortgages to the largest Wall Street banks, we have seen that it does not work in our rural States and our rural areas.

The bill we are now considering provides relief to rural customers by deeming certain mortgages held by lenders with less than $10 billion in assets as qualified mortgages, allowing community banks and credit unions to expand the types of mortgages they offer while maintaining critical consumer protections--meaning more choice and more opportunity for financing for consumers across the country. This means that our community banks and credit unions in our State and across the Nation will be able to offer a wider range of credit products and better serve the small businesses, farmers and ranchers, and hard-working individuals in our communities.

Another important issue facing our rural communities is a critical shortage of appraisers. The appraisal is a key component of the home- buying process and is important to both borrowers and lenders. The bank wants to know that the home financing they provide can be supported by the collateral, and the borrower wants to make sure they are not paying more than the home is worth.

In rural areas, including my State and many others, conducting appraisals can be more complex than in suburban and urban areas because there are fewer sales and fewer comparable properties. This makes it vitally important that there are local appraisers who are familiar with the area they are working in. However, we are seeing a dramatic shortage of appraisers right now in our State and I know in other States as well. For example, of the 53 counties in our State, 29 have no resident appraisers. This means that all properties sold in those counties are appraised by appraisers from outside the county, sometimes from across the State. This can lead to significant wait times for an appraisal to be completed, as well as the potential for inaccurate appraisals.

This bill provides relief for home buyers in rural areas by exempting rural mortgage portfolio loans of less than $400,000 from being required to have a certified appraisal if the lender is unable to find a State-certified or licensed appraiser to perform that certified appraisal within 5 days. This will help reduce the cost to consumers and streamline the already time-consuming home-buying process.

Additionally, this bill helps further protect consumers from identity theft and other predatory practices by requiring credit bureaus to provide consumers with one free freeze alert and one free unfreeze alert per year. These tools will empower consumers to take more control over their credit and better protect themselves from potential fraud.

This legislation also includes a provision I cosponsored that would provide protections for bank employees who disclose the suspected exploitation of a senior citizen to a regulatory or law enforcement agency. This will encourage whistleblowers to come forward and protect senior citizens from financial exploitation.

Additionally, I have filed an amendment, which I am urging my colleagues to support, that would help our farmers weather the low commodity prices and economic downturns in farm country. I have heard from many farmers and bankers across the country that the current Farm Service Agency, or FSA, loan program levels are outdated and do not reflect the current ag economy.

My amendment would increase the maximum direct loan amount for the Farm Operating and Farm Ownership Programs to $600,000 from the current level of $300,000. It would also increase the maximum guaranteed loan amount for these programs from $1.39 million to $2.5 million. This would allow new and beginning farmers to purchase land and equipment or provide necessary operating capital to help farmers endure through the downturn in commodity prices. I will continue to work with my colleagues on that amendment.

In conclusion, the Economic Growth, Regulatory Relief, and Consumer Protection Act provides real regulatory relief to our community banks and credit unions. I believe this will benefit consumers across this country. It empowers lenders to sell products tailored to their customers, assists rural communities impacted by the shortage of certified appraisers, and provides enhanced consumer protections from identity theft, fraud, and predatory practices.

It is past time that we provide regulatory relief to the community banks and credit unions across this Nation. Passing this bill will further economic development, increase lending in rural communities, and alleviate the onerous requirements placed on our small community financial institutions by Dodd-Frank. I urge my colleagues to support this bill.

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