(Melissa Miller) [Order this photo]
Overregulation by the federal government is overriding the common sense banking practices used by community banks in Southeast Missouri for years, bankers said.
Emerson met with bankers, real estate agents and small business owners to get their input as she prepares a financial services appropriations bill. She serves as the chair of the appropriations subcommittee on financial services and general government, which has oversight of the U.S. Treasury, the Internal Revenue Service and other federal regulatory agencies.
"The overregulation is like drinking from a fire hose," said Danny Essner, executive vice president at Capaha Bank. "You barely have time to read them, let alone implement them."
New regulations imposed by the Office of the Comptroller of the Currency aimed at providing more consumer protection after the mortgage crisis in 2009 are doing more harm than good, bankers said.
"We've all been stripped of our ability to do our jobs," said Jay Knudtson, executive vice president at First Missouri State Bank.
New guidelines for real estate appraisals are keeping otherwise qualified buyers from getting home financing, bankers said.
"It's ludicrous. Someone with no down payment and marginal credit will get a loan, but now someone who may have a good down payment and been in their job 15 years can't get a loan," Essner said.
Philip Cantoni, vice president at Wood & Houston Bank, told Emerson about a recent customer who was willing to pay $300,000 for a home, but its appraisal came back lower at $250,000, keeping him from getting the loan he needed to purchase it.
Underwriters want to look at comparable properties that have recently sold to provide assurance that the home is worth the sale price, explained Bill Cole, owner of Realty Executives.
In some cases, such as a large home in the country, it's nearly impossible to find something comparable nearby. New regulations also prevent banks and real estate agents from speaking to appraisers and impose large fines if they do so.
"In the past, appraisers would call Realtors to get additional properties that might qualify as a comp. Now they can't call us," Cole said.
The growing number of foreclosures is also impacting home appraisals, Realtors said.
"Every time a neighborhood gets a foreclosure, it brings all the values down," said Bob Herbst, a Realtor with Prudential Bridgeport.
This year, 17 percent of the homes sold in this area were foreclosures, Cole said.
In the past 12 months, the number of homes sold is down 12 percent, and down 47 percent from the market's prerecession peak, Cole said.
"It's a market that most places in the country would love to have, but if you own a company and the number of units sold is off 50 percent, it makes it difficult for all the individual Realtors to make a living," he said.
Jennifer Hendrickson, owner of Hendrickson Business Advisors and Murphy Business Brokerage, said businesses are also having trouble securing loans they need to expand.
"We have collateral-based lenders and collateral isn't in such a hot position right now, especially when we're talking about commercial buildings," she said.
A company may have good cash flow, but can't come up with the collateral banks are now requiring.
"A lot of deals aren't getting done that could be," Hendrickson said.
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