Community bankers argue that they never engaged in the sort of lending practices that led to the financial crisis. And I think that in most cases, the evidence supports their claims. However, as I mentioned earlier, data from the HMDA and Call Reports indicate that community bank lending does share some characteristics with subprime lending.
For example, community banks appear to charge higher rates on their mortgage loans. And the maturity data in the Call Reports are consistent with variable-rate lending or balloon maturities on community banks’ mortgage loans. But looking for signs of stress in the performance of the loans reveals a stark difference between mortgage loans held by community banks and subprime loans.