As we noted when the Crapo bill was enacted, provisions creating a “community bank leverage ratio” (CBLR) redefine the business of community banking.  This report assesses the inter-agency NPR implementing the CBLR to make it still more beneficial to banks and BHCs with assets of less than $10 billion.  Although many will use their new-found portfolio capacity to double-down on commercial real estate lending – uh oh – significant increases in residential-mortgage holdings are also likely in concert with smaller books of GSE and Ginnie obligations.  Here, we lay out why this is and the specific construct of this newly-empowered segment of the housing-finance system.

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