“For some reason, many in Washington seem to believe that ‘balloon' notes are inherently bad. They're not,” the letter said. “Most community banks have made loans with a balloon feature for decades, and have done so without incident. They have made these loans, as opposed to making an ‘adjustable rate mortgage loan,' because they are less costly and much simpler for the customer to understand and service. They are also much easier, generally less risky and much quicker for the bank to make.”
Tightening regulations on how such loans can be made could have a crippling effect on the ability for consumers to gain access to credit, said Roger Beverage, bankers association president and CEO.
“Community banks in the state are being unduly punished by a one-size-fits all mentality for regulations in Washington, D.C.,” he said Tuesday.