Helping Expand Lending Practices in Rural Communities Act

Madam Speaker, I want to thank the chairman of the Financial Institutions Subcommittee for her leadership on this important legislation. I want to thank also my colleagues on the other side of the aisle who have joined us in a bipartisan way to advance this sensible legislative correction.

Madam Speaker, obviously, government bureaucrats don't always know best, and they certainly don't know our local communities better than we do. That is why I introduced H.R. 2672, the Helping Expand Lending Practices in Rural Communities Act, or HELP Rural Communities Act, which would help remedy a bizarre situation created by a flawed, one- size-fits-all government regulation that is making life harder for millions of Americans, including my constituents in central and eastern Kentucky.

My legislation, the HELP Rural Communities Act, is about making the Federal Government more responsive to the people who know their communities better than regulators in Washington, D.C. It is a simple, pragmatic, and bipartisan solution that says that if Federal bureaucrats are going to impose different rules based on the localized characteristics of an area, then they actually need to listen to the input of the people in the communities who know those characteristics of those communities.

A few weeks ago, I was visiting with constituents in a rural county in my district, Bath County, in a country general store. And when I was sitting there talking to my constituents, a horse-drawn buggy passed by. Now, this is far from an uncommon occurrence. This was just another reminder that Bath County, Kentucky, in my district, is very much a rural area.

Amazingly, however, the Consumer Financial Protection Bureau in Washington does not recognize Bath County as rural. Instead, the bureaucrats at the CFPB improperly designated Bath County as nonrural. Now, there are plenty of similar examples throughout the country of the CFPB oddly and incorrectly designating undeniably rural areas as nonrural, which is why H.R. 2672, the HELP Rural Communities Act, enjoys broad, bipartisan support and passed out of the Financial Services Committee by a vote of 55-1.

You may be wondering why this rural versus nonrural distinction matters. Well, here is why: the CFPB imposes more stringent lending rules and restrictions on local financial institutions based in nonrural communities than it does on financial institutions in rural communities. So when the Bureau gets these rural designations wrong all throughout the country, the consequence is that it constrains the availability of credit, including for balloon loans, to rural customers of community banks and community credit unions.

But don't just take it from me. Charles Vice, who is the top banking regulator in the Commonwealth of Kentucky, the commissioner of the Kentucky Department of Financial Institutions and the chairman of the Conference of State Bank Supervisors, has emphasized the importance of preserving balloon loans in rural communities.

In his testimony before our committee, the Financial Services Committee, in the House in June, Commissioner Vice stated:

When used responsibly, balloon loans are a useful source of

credit for borrowers in all areas. Properly underwritten

balloon loans are tailored to the needs and circumstances of

the borrower, including situations where the borrower or

property is otherwise ineligible for standard mortgage

products.

So the need for this legislation has been made clear by the regulators themselves. But it has also been made clear to me by a community banker in Bath County, a community banker who has been part of his local institution for multiple generations. His father was the president of the community bank, his grandfather was the president of the community bank and, before that, his great-grandfather. This young man, Thomas Richards, testified before our committee in December.

He said:

Unnecessary restrictions on balloon loans will lead to some

qualified borrowers not receiving the credit that they

deserve, and from a small community's standpoint, these

restrictions would be devastating to the livelihood of that

area.

It was really interesting to hear Mr. Richards testify because he said that his small, little community bank in Bath County, Kentucky, had survived the great economic changes over the centuries. It had survived the Great Depression, it survived the stagflation of the late 1970s and the early 1980s, and it even survived the financial crisis in 2008. But he said that the greatest single threat facing his small, community bank in rural Bath County, Kentucky, was the avalanche of red tape coming out of Washington in 2013 and 2014.

If left unfixed, these rules will block customers in rural communities from obtaining responsibly underwritten balloon loans. These are loans which Kentucky bankers throughout my district commonly use to provide credit to local customers who may not fit perfectly into Washington-dictated lending straitjackets.

These loans are vital to all kinds of individuals in rural America, from businessowners on Main Street, who simply seek to preserve their business, to farmers preparing for the next planting season.

A balloon loan can be the lifeline that finally helps a young family purchase a home; or it can help an individual repair their car, so they can get to work each day. At its core, balloon loans are common throughout rural America because they offer consumers flexibility and help community banks and community credit unions mitigate interest rate risk.

As you can see, these loans are tailored to the credit needs of the customer, which is why they are so popular throughout Kentucky. The tradition of community backing in Kentucky has always been about relationship banking. It is about truly knowing your customer and having that development of trust, so that the banker knows whether or not the customer can repay that loan.

H.R. 2672 is necessary because it preserves the best traditions of rural community banking, which are now being jeopardized by the Consumer Financial Protection Bureau's incorrect rural designations throughout the country.

Really quickly, what does the bill exactly do? This bill creates a petition process in which individuals within a State could petition the Bureau to have it reconsider an improper designation of nonrural status for an area that is plainly rural.

Instead of limiting applicants to only being able to challenge a designation based on county lines, H.R. 2672 would give the applicant the flexibility to define the specified and bounded area that they would like to see switched from nonrural to rural.

In other words, we don't want to lock people into using counties when they

don't have to. This is important because county sizes can vary significantly throughout the country, particularly in Western States, and I want to thank my colleague and friend on the other side of the aisle, Congressman Hinojosa, for his contribution to this feature of the legislation.

The legislation specifies a number of commonsense factors that CFPB must consider when evaluating an application. In addition to the local input of the applicant, these factors include population density; a written opinion provide by the State's bank supervisor; and criteria used by the Census, OMB, and the Department of Agriculture for properly classifying geographic areas as either rural or urban.

Upon receiving an application, the CFPB is to provide for a 90-day public comment period and then grant or deny such applications within an additional 90 days. The Bureau shall then publish in the Federal Register an explanation of the factors it relied on in making its ultimate determination.

Once again, I am pleased that this is a bipartisan bill. I want to thank especially Congressman Hinojosa for his input in helping to improve this legislation. I also want to thank all of the other cosponsors of the bill, which is endorsed by a broad coalition, including the Kentucky Bankers Association, the Conference of State Bank Supervisors, the Kentucky Credit Union League, the Credit Union National Association, the National Association of Federal Credit Unions, the American Bankers Association, the Independent Community Bankers of America, the National Association of Realtors, and the chairman of the Kentucky Department of Financial Institutions--again, the top banking regulator in Kentucky, Commissioner Charles Vice.

This is a commonsense and simple bill, and I appreciate the opportunity to present it here today. I urge my colleagues to support this simple reform piece of legislation, and I urge the support and immediate passage of this legislation.

Madam Speaker, I thank my friend, Mr. Royce of California, for his remarks, and I yield myself such time as I may consume. As I say: ``Two Eds are better than one.'' So we will start with that.

This bill is designed to create parity between certain accounts held at credit unions and those held at FDIC insured banks.

As a preliminary matter, I introduce into the Record six letters.

The first is a letter dated September 17, 1996, signed by Richard Schulman, the associate general counsel of the National Credit Union Administration.

Second is a letter dated October 8, 2008. That is from Sheila A. Albin, associate general counsel.

A letter dated May 6, 2014, from the American Bar Association, signed by the president, James R. Silkenat.

A letter dated May 5, 2014, signed by Brad Thaler of the National Association of Federal Credit Unions.

A letter dated May 5, 2014, signed by Bill Cheney, president of the Credit Union National Association.

And finally, a letter signed by Scott Earl from Mountain West Credit Union Association.

September 17, 1996.

Re Interest on Lawyers Trust Accounts (``IOLTA''), (Your

August 22, 1996, Letter)

Elyse E. Rogers, Esq.,

Mette, Evans & Woodside,

Harrisburg, PA.

Dear Ms. Rogers: In your letter, you requested our opinion

as to whether Pennsylvania attorneys can maintain client

trust funds, in association with Pennsylvania's IOLTA

Program, in share draft accounts at credit unions regulated

by the National Credit Union Administration. As discussed

below, the answer depends upon the credit union membership

status of the clients whose funds are contained in the IOLTA

account.

Specifically, the bill extends insurance coverage to Interest on Lawyer Trust Accounts, as Mr. Royce said, and I will call those ``trust accounts or similar escrow accounts,'' those that are held at credit unions that are otherwise fully insured at FDIC-insured banks up to $250,000.

As a practicing lawyer for 25 years, I know Lawyer Trust Accounts in Colorado as COLTAs, or Colorado Lawyer Trust Accounts, which we established for our clients so that interest can be earned for various charities that might exist. For instance, legal aid which provides assistance to veterans or people involved in domestic violence situations.

Under our bill, if a credit union were ever to fail and needed to be resolved, then the client funds held in an escrow account would be insured and thus protected, regardless if the beneficiary is a member of the credit union or not. In my instance, if I had a trust account which had a number of different clients, some clients might be members of the credit union, others are not. Only those under current law that are members of the credit union are covered by share insurance. Those that are not members of the credit union are not covered. So we are trying to stop this differentiation between banks and credit unions.

Currently, the NCUA's regulations and legal opinions as established in 1996, which is one the letters we are introducing today, do not allow Federal deposit insurance equal to the coverage provided by the FDIC for accounts held by credit union members that contain funds owned by one or more nonmembers.

IOLTA accounts often contain funds from many clients, some of whom may not be members of the particular credit union where the attorney or the escrow agent has opened the account.

With an IOLTA account or other escrow accounts held in trust, under current law, the membership status of the client/beneficiary, and not of the agent or the attorney, is determinative as to whether an IOLTA account can be properly maintained. In order for a law firm or a real estate escrow company to maintain an IOLTA account at a credit union, either all of the clients whose funds would be deposited must be members of that credit union or the credit union must be designated as a low-income, which would allow it to accept nonmember funds.

Many States or bar associations require the funds in an IOLTA to be fully insured, meaning a lawyer may not be able to use a credit union for these accounts if they can't be fully covered.

It is important to note that this legislation should not be seen as an authorization to take nonmember deposits beyond the current regulatory limits, nor should it be seen as an authorization for the NCUA to increase those thresholds.

What we have before us today is a negotiated compromise. The language as introduced in the manager's amendment narrowly defines which accounts will be extended Credit Union Share Insurance Fund coverage. This includes IOLTA/COLTAFs and other escrow accounts held in trust.

I thank my friend from California for bringing this legislation. It is time that there be parity and that all of the clients be covered by the Share Insurance Fund.

I urge quick passage of H.R. 3468, the Credit Union Share Insurance Fund Parity Act.

I yield back the balance of my time.

Madam Speaker, I move to suspend the rules and pass the bill (H.R. 2672) to provide for an application process for interested parties to apply for a county to be designated as a rural area, and for other purposes, as amended.

Madam Speaker, I ask unanimous consent that all Members have 5 legislative days within which to revise and extend their remarks and submit extraneous materials for the Record on H.R. 2672, as amended, currently under consideration.

Madam Speaker, I yield myself such time as I may consume.

Madam Speaker, the legislation before us this afternoon makes an important improvement to the Consumer Financial Protection Bureau's qualified mortgage rule that went into effect this past January. Under the Bureau's proposed rule, a community bank or credit union operating in a rural community would be afforded some flexibility to underwrite mortgages that otherwise would not be deemed a qualified mortgage. These products, sometimes referred to as balloon loans, are a critical source of mortgage credit in rural and agricultural communities. Although the Bureau has recognized the importance of this type of credit in rural communities, the definition that they used for a rural community will result in fewer mortgage options for consumers in rural communities.

The Bureau relied on the U.S. Department of Agriculture's Urban Influence Codes to define a rural community. Under this definition, half of the counties in the State of West Virginia are considered urban. Well, I think those of us who have driven through West Virginia would find that hard to believe. According to the Bureau, Clay County, West Virginia, which has a population density of 30 people per square mile, is urban. Similarly, neighboring Calhoun County, which has a population density of 27 people per square mile, is also deemed urban by the Bureau. These examples demonstrate a complete lack of understanding of rural America.

Mr. Barr's legislation sets up a process by which a community can petition the Bureau to be reclassified as rural. This commonsense approach strikes an appropriate balance that will allow consumers in rural areas to continue to have access to mortgage credit. I commend Mr. Barr of Kentucky for authoring this legislation and deftly navigating it through the House Financial Services Committee, where it passed 55-1.

I urge my colleagues to support this critical piece of legislation. Obviously, it will have a great impact on rural America, which is where I live and where many of us do, too. I reserve the balance of my time.

Madam Speaker, I now would like to yield as much time as he may consume to the gentleman from Kentucky, Congressman Barr, the author and sponsor of this legislation.

Madam Speaker, I have no further speakers, and I reserve the balance of my time to close.

Madam Speaker, I yield myself the balance of my time.

I echo the comments of the ranking member, and I thank her for her help on this bill. I thank Mr. Hinojosa and Mr. Barr for their good, hard work.

As I said earlier in my opening statement, rural America does have a different way of trying to access credit and to make sure that homeownership becomes the reality that many of us hope for our families. I would like to congratulate the sponsors, and I urge passage of the bill.

I yield back the balance of my time.

Madam Speaker, I move to suspend the rules and pass the bill (H.R. 3468) to amend the Federal Credit Union Act to extend insurance coverage to amounts held in a member account on behalf of another person, and for other purposes, as amended.

Madam Speaker, I ask unanimous consent that all Members have 5 legislative days in which to revise and extend their remarks and to include extraneous materials on the bill, H.R. 3468.

Madam Speaker, I yield myself such time as I may consume.

I rise in strong support of the Credit Union Share Insurance Fund Parity Act. This is a bill which passed out of the Financial Services Committee on a voice vote. This is bipartisan, commonsense legislation. The bill is supported by the Credit Union National Association, the National Association of Federal Credit Unions, the California and Nevada Credit Union Leagues, as well as the American Bar Association.

What this bill does is to ensure that there is parity in the treatment of trust accounts covered by the National Credit Union Share Insurance Fund and the Federal Deposit Insurance Corporation, the FDIC.

The Financial Services Committee has heard the testimony of credit unions from West Virginia to Texas that:

There is no public policy reason for deposit insurance

purposes to distinguish credit union interest on lawyer trust

accounts (IOLTAs) from those insured by FDIC. It is essential

for the NCUA's share insurance fund to be treated identically

in order to maintain parity between the two Federal insurance

programs.

Specifically, the bill amends the Federal Credit Union Act to require that pass-through share insurance coverage be provided when a credit union member holds funds on behalf of a nonmember in an IOLTA or other similar account.

Unlike FDIC coverage, currently the National Credit Union Administration treats funds held by credit union members on behalf of those who are not federally insured credit union members as not covered by the National Credit Union Share Insurance Fund. This has created, of course, a disparity in coverage, specifically when looking at IOLTAs and prepaid debit master accounts.

Part of the mission of credit unions from their very beginning has been to reach out to the community around them, especially to reach out to the underserved. Maintaining a strong commitment to the IOLTA community and removing a barrier to greater participation sustains that very mission.

I urge my colleagues to support this bill, a bill which corrects a technical disparity between the way trust accounts are federally insured at credit unions and at banks.

I look forward to the statement of the other Ed, the gentleman from Colorado, my friend, who has been a champion of this important bill.

I reserve the balance of my time.

Madam Speaker, I yield back the balance of my time.

Madam Speaker, I yield myself such time as I may consume.

Madam Speaker and Members, I rise in support of H.R. 2672, the CFPB Rural Designation Petition and Correction Act. I want to thank the distinguished gentleman from Texas (Mr. Hinojosa) and the gentleman from Massachusetts (Mr. Lynch) for working with the gentleman from Kentucky (Mr. Barr) to introduce this bipartisan legislation.

The Consumer Financial Protection Bureau has recognized the challenges rural communities with limited access to banking services face and are appropriately reconsidering how to designate rural counties.

However, some large counties can have both large urban centers and rolling farmland within their borders, preventing them from being considered rural. This measure would direct the Consumer Financial Protection Bureau to establish an application process so that a lender who lives or does business in a county that does not meet the rural definition can still apply to serve

as a rural lender under the CFPB's qualified mortgage rule.

While balloon payments were a feature of many of the risky and predatory loans that ended in financial disaster for American families, there are some specific places and times when they may make sense, especially in rural communities.

I am pleased that this legislation is narrowly tailored to ensure the kinds of institutions that would be allowed to make these loans are truly community banks--small institutions that play an active role in their communities, with personal knowledge of their customers and their needs.

As we have learned from flood insurance reform, applying map-based standards uniformly across the diverse geography of the U.S. is incredibly challenging. This legislation would ensure that in areas that may not fit the standard, but where common sense shows them to be rural, the local community would have input into the process.

I also want to acknowledge the CFPB for acting very quickly in the face of the feedback it received on the rural definition it initially proposed, making certain that credit continued to flow to borrowers by offering a 2-year waiver for all small creditors during the process of re-proposing its rural definition.

Madam Speaker, I urge my colleagues to support this measure, and I reserve the balance of my time.

Madam Speaker, I yield such time as he may consume to the gentleman from Texas (Mr. Hinojosa), a cosponsor of H.R. 2672.

Madam Speaker, I would simply like to ask all of my colleagues to support this important legislation, and I would like to commend Mr. Hinojosa and Mr. Barr, and I would also like to commend Mrs. Capito and all who have worked so well together to ensure that we pay attention to the problems of rural communities, and this bill certainly does that.

I yield back the balance of my time.