Fed chairman applauds small lenders

In a recent speech to industry professionals, Federal Reserve Chairman Ben Bernanke stated that small lenders, such as a community bank, continue to be driving forces behind the mortgage industry recovery.

In a recent speech to industry professionals, Federal Reserve Chairman Ben Bernanke stated that small lenders, such as a community bank, continue to be driving forces behind the mortgage industry recovery.

Bernanke recognized that community banks are gaining momentum despite marginal growth in the overall economy - noting that the profits of these financial institutions were significantly higher in 2011 than the previous year.

"The good news is that, for the most part, community banks appear to be meeting their challenges," he said. "Profits of smaller banks were considerably higher in 2011 than in the previous year, nonperforming assets were lower, provisions for loan losses fell appreciably, and capital ratios improved."

Bernanke added that in the current economy, small lenders need to maintain high lending standards, practice risk management and governance to ensure prosperity. He also noted that this should prevent them from lending to creditworthy borrowers, as this is the best way for banks to earn money. 

However, despite recent criticism, Bernanke did not address the Fed's decision to keep interest rates low until at least 2014 to give borrowers more affordable closing solutions.



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