Comment on CFPB-2012-0031-0018

I am currently Chairman of the Nebraska Independent Community Bankers Association and President of a community bank is a small rural community in Nebraska, with a population of 500 people. We hold approximately 30% of our loan portfolio in 5 year balloon mortgages or around $4 million. We have done this type of lending for decades, with no foreclosures in over 10 years. These balloon mortgages provide a great service to our customers, and also are vital to our communities in maintaining the housing stock and vitality of our small communities. These balloon mortgages are sometimes the only option for our customers that live in smaller markets in rural areas, where we don’t have easy access to the secondary mortgage market. Last week I surveyed our 24 member bank board of directors with regards to who has exited the mortgage lending business due to regulations and who were considering exiting the mortgage lending business. I got back 13 replies out of 24 --- 8 have already left the business or are in process of leaving the business, 4 are now considering leaving the business, and one was staying in the business, but he listed 7 other community banks in his area that had left the business. I fear for community banks being able to remain in this market, if the proposed regulations do not exempt community banks. 1st – the qualified mortgage & ability to pay proposal, safe harbor needs to include balloon mortgages held by community banks that hold these loans in portfolio for the life of the loan. We have done this type of lending for decades and if the CFPB would research the foreclosure rate of these balloon loans at community banks, I am sure it is very low. 2nd – the required certified appraisals for higher risk mortgages will not work in small rural communities and will push out many more community banks from the business. For example, if a customer comes in for a $25,000 home improvement loan, we would have to make that loan under 4.50