Some bankers expressed concerns that the lack of a government guarantee might make it more difficult to attract outside investment in the mortgage market. Capito said she had heard those concerns and would consider making improvements, calling the PATH Act a "first step."
"It's in a process, right now, it's not firm, but it is moving and I think it's about time," she said. "It's been five years (since the bailout), and I think it's about time we start looking at reform and alleviating the taxpayer burden that Fannie and Freddie present."
Capito also said she and other lawmakers were pressing the federal Consumer Financial Protection Bureau for a one-year delay in implementing new rules for so-called qualified mortgages.
The rules apply to mortgages that banks intend to sell off and focus on the ability of borrowers to pay off the loan. If the borrower fails to meet a certain debt-to-income ratio, the mortgage is not considered qualified.
Capito said a private study by real estate analysis firm CoreLogic found that 52 percent of loans made in 2010 did not fall under the qualified mortgage standard. She said the new standard, which goes into place Jan. 1, would make community banks less likely to lend to people below that threshold.
"Who's going to get thrown out of this? It's not going to be the very wealthy, or the folks who have a lot of income," she said. "It's going to be the farmer who maybe had a bad year, or the doctor right out of medical school who might have a lot of income but has a lot of debt from school, or the single mom who is just coming out of a divorce and doesn't have a lot of income."
Capito said she wasn't optimistic that regulators would delay the rule but said community banks should speak up before the change goes into effect.
West Virginia Banking Association President Joe Ellison said banks have already felt the impact of regulations over the years. Regulatory burdens, he said, have forced consolidations and mergers as companies have realized they were too small to have adequate compliance staffs.
In 1984, there were 248 banks doing business in West Virginia. Today, that number hovers around 80, 56 of which are community banks, with the rest made up of out-of-state bank companies.
He said that trend is continuing as a result of regulations passed following the 2008 crisis.
"Most everybody that's being hired today is a new compliance guy," Ellison said. "So instead of hiring new retail or sales people to go out and make more loans and that kind of stuff, they're spending their money on trying to comply with all the regulations."
Capito said the regulations were designed for the larger financial institutions that were the cause of the financial crisis. She said the vast majority of local community banks run their businesses in a responsible manner and don't involve themselves in the more risky investment strategies of larger institutions.
She said she has been pushing to find some way to separate the regulatory approach for big banks from that of the smaller ones.
"For a J.P. Morgan that can afford all kinds of accountants and lawyers and compliance offices to understand and navigate all this, it's OK," she said. "For a smaller institution, it's not fine. It's almost untenable."
Contact writer Jared Hunt at busin...@dailymail.com or 304-348-4836.