Throughout the years, the small, neighborhood bank has played a major role in the financing of real estate. Known for lending on a more personalized basis through their own portfolio, small banks at times have been a stark contrast to the rigid lending standards of the major banks that dominated (and suffocated) the real estate landscape over the last decade.

Multiple times we've discussed at length the mortgage lending changes being proposed at the federal level, changes that largely play into the hands of the big banks who are largely responsible for the mess that's been left behind the financial crisis. What's being called the "qualified residential mortgage" (QRM) is currently under consideration, and the point of the QRM is to define what is a qualified loan based on a set of standards (i.e. credit score, down payment, etc); borrowers who fall outside of the requirements will be met with higher loan costs and rates.

As a result of some of the QRM requirements that will harm a large pool of good borrowers, smaller banks are now arguing to be exempt from the requirements because they put additional pressure on them and are unnecessary given their particular lending history and success.

Jack Hopkins, CEO of CorTrust Bank, a smaller bank in South Dakota, told the Senate Banking Committee (who is currently considering which direction the QRM standards should go) that the rigid standards would likely put him out of business:

"As this committee considers the development of national mortgage servicing standards, I urge you to ensure that they do not add to the regulatory burden of community banks, which are servicing their portfolios successfully and have not contributed to widely- reported problems… We must preserve the role of community banks in mortgage servicing because the alternative is further consolidation in the servicing industry, which will only harm borrowers."