Magazine article American Banker

FCA Withdraws Plan for Lending in Disaster Areas

Magazine article American Banker

FCA Withdraws Plan for Lending in Disaster Areas

Article excerpt

Farm Credit System lenders that have long been angling for permission to make more home loans saw a window of opportunity in the aftermath of Hurricane Katrina.

But as its regulator was trying to make the case that the system's lenders should be allowed to make loans in federally declared disaster areas, the banking industry began flexing its considerable lobbying muscle -- and the idea was soon abandoned.

Early last week bank trade groups got wind that the Farm Credit Administration had been seeking to attach an amendment to an agriculture appropriations bill that would let Farm Credit System lenders make home loans in communities of up to 50,000 residents that are declared federal disaster areas. (Currently the lenders cannot make home loans in towns with populations higher than 2,500.)

Within days the American Bankers Association and the Independent Community Bankers of America had fired off letters urging key lawmakers to oppose any expansion of the lenders' mortgage authority.

"This egregious proposal is an attempt to profit from the misfortune and misery of victims of natural disasters and is completely unnecessary and inappropriate," ICBA president and chief executive Camden R. Fine wrote in a letter to Sen. Robert Bennett, R-Utah, the chairman of the Senate Appropriations subcommittee on agriculture and rural development.

The groups also brought the proposal to the attention of House Banking Committee Chairman Michael G. Oxley, R-Ohio, and the committee's ranking Democrat, Rep. Barney Frank of Massachusetts, who questioned the House Agriculture Committee's jurisdiction over the Farm Credit System.

The proposal "is not a matter that has fully been vetted by our committee," Reps. Oxley and Frank wrote in a letter this week to the House Agriculture subcommittee on agriculture and rural development. …

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