Expert Predictions: Banking | How will new financial regulations affect community banks and credit unions?
As he looks forward to 2010, Rob Kimmett, senior vice president for marketing and public relations at the Massachusetts Credit Union League in Marlborough, said he expects lawmakers and regulators at the state and federal level to continue efforts to rein in lenders. The question for him is how new rules will affect credit unions.
“The thing is the need to revamp is so big and the desire of people to see something done is so strong there’s a risk that unintended consequences will occur,” he said.
One worry, Kimmett said, is that credit unions will end up under the jurisdiction of a proposed “super-regulator” designed to provide more oversight to financial dealings.
“It really doesn’t make sense for credit unions to be subject to, or regulated by, people that are looking over multi-trillion-dollar financial conglomerates,” Kimmett said. “The issues are entirely different.”
For one thing, he said, credit unions were never part of the risky lending practices that caused the big financial crashes and led to the call for more regulation. For another, they’re far smaller than the big lenders and would have to devote a far larger percentage of their manpower to complying with new rules.
At the same time, Kimmett said he has high hopes for what he sees as a positive change: an end to a federal cap on credit union lending to small businesses. With other sources of credit less available than they once were, he said the need for the change is obvious, and he thinks lawmakers will agree.
Mortgage lenders have already started feeling the effects of state and federal regulation that were put in place to control the kind of loans that led to the housing market crash. And Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association, says that means a tight mortgage market that isn’t likely to loosen up in the coming year.
“I don’t think that there are any legislative or regulatory changes that could be applied to the mortgage industry that have not been applied already,” Cuff said.
He said federal and state measures restricting lending and expanding the rights of some borrowers have already resulted in tougher standards for home-buyers.
“The impact on the ground right now is a tightening of credit standards and … in a lot of situations the unavailability of credit lines for consumers to get access to funds,” he said.
Cuff said that means credit markets that were once backed by both private and public sources are now mostly the domain of government-backed loans.
“Maybe that’s a good thing,” he said, “But it’s not that good a thing if you are a first-time homebuyer looking for aggressive lending.”
He added that low- and middle-income people with less-than-perfect credit are also effectively locked out of the housing market as things stand now.
Cuff said he doesn’t expect 2010 to bring a significantly tighter, or looser, mortgage market.
“For the foreseeable future I don’t expect there to be too many changes,” he said.
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