ROAD to Housing’s Community Bank Provisions Broaden Builder Financing Options

The 21st Century ROAD to Housing Act includes nine provisions designed to strengthen small financial institutions, including community banks, by easing regulatory burdens, reducing funding costs, and encouraging the creation of new banks.

These provisions are especially important for small builders, who often depend on community banks for construction loans. Yet the number of community banks continues to fall as costs and regulatory pressures rise, while few new banks are being formed.

Strengthening existing community banks and supporting new ones can expand builders’ access to credit, help finance housing development, and give home buyers more mortgage choices.

The housing law will help strengthen community banks, encourage new bank formation, and support more home building by:

• Lowering community bank funding costs by allowing more custodial and reciprocal deposits without classifying them as restricted brokered deposits.
  
  
• Establishing a two-year pilot program to help launch new community banks, particularly in rural areas with limited lending options.
  
  
• Directing federal financial regulators to streamline applications for new community banks.

Federal banking agencies are expected to implement the new rules through regulation and supervision. Along with the National Credit Union Administration, they also will study ways to support rural depositories. Most community bank provisions require agency action by July 11, 2027, one year after enactment.

Robert Carroll, a Louisiana builder and chair of the NAHB Housing Finance Committee, and Allison Karakis, NAHB director of financial institutions and capital markets, explain in the videos below how the law’s community bank provisions will benefit members.

For more information on land use, zoning, and other key provisions in the 21st Century ROAD to Housing Act, visit nahb.org/road.