A bill critical to the mortgage industry goes to the floor of the House of Representatives today for debate, and supporters say it could greatly ease the regulatory burden placed on lenders and securitizers.
The Mortgage Choice Act of 2015 by U.S. Rep. Bill Huizenga, R-Mich., would amend and clarify the qualified mortgage definition in the the Dodd-Frank Wall Street Reform and Consumer Protection Act thereby improving access to credit and qualified mortgages for low and moderate income borrowers while protecting consumers from bad loans.
The Mortgage Choice Act would also adjust the Truth in Lending Act definition of fees and points by exempting points and fees any affiliated title charges and escrow charges for taxes and insurance from the qualified mortgage cap on points and fees.
Dodd-Frank established the QM as the primary means for mortgage lenders to satisfy its “ability to repay” requirements. Dodd-Frank also provides that a QM may not have points and fees in excess of 3% of the loan amount. As currently defined, points and fees include fees paid to affiliated (but not unaffiliated) title companies, as well as amounts of insurance and taxes held in escrow.
As a result of this problematic definition, many affiliated loans, particularly those made to low- and moderate- income borrowers, would not qualify as QMs and would be unlikely to be made or would only be available at higher rates due to heightened liability risks. Consumers would lose the ability to choose to take advantage of the convenience and market efficiencies offered by one-stop shopping.
The Mortgage Choice Act excludes from the definition of points and fees all title charges, regardless of whether they are charged by an affiliated company, provided they are bona fide and reasonable.
Most housing financial and housing trade groups support the Mortgage Choice Act, including the Mortgage Bankers Association, the National Association of federal Credit Unions, the Mortgage Lenders Association, the Consumer Mortgage Coalition, the Credit Union National Association, the National Association of Home Builders, the Real Estate Services Providers Council, the Realty Alliance and the National Association of Realtors.
Supports say that by amending the definition of points and fees in this manner, the legislation will:
- promote the availability of safe and affordable mortgage credit;
- maintain a competitive marketplace,
- prevent higher prices or the withdrawal of affiliated title service providers in low- and moderate-income marketplaces; and
- preserve the ability of consumers to choose the benefits of one-stop shopping when they purchase or refinance their home.
The Mortgage Bankers Association says that passage of the Mortgage Choice Act would help improve the regulatory environment in a way that helps consumers gain access to sustainable mortgage credit.
“On behalf of the Mortgage Bankers Association, I want to express our enthusiastic support for H.R. 685, the Mortgage Choice Act, which the House of Representatives will vote on this week,” said David Stevens, chairman and CEO of the MBA. “This bipartisan legislation would modify the definition of “points and fees” used to determine whether a loan meets the Ability to Repay rule’s test for Qualified Mortgages.
But Congresswoman Maxine Waters, D-Calif., said that H.R. 685 would roll back critical consumer protections enacted under Dodd-Frank and leave many low-income and minority families exposed to the kinds of predatory practices that were commonly used in the run-up to the financial crisis.
“I strongly oppose both of these proposals, which will weaken the Consumer Financial Protection Bureau, roll back key protections for homeowners and leave consumers vulnerable to the same kinds of predatory lending practices that were all too common leading up to the financial crisis,” Waters said. “Watering down important protections enacted in the aftermath of the worst financial crisis in a generation will ultimately bring back higher costs for borrowers, facilitate the kind of steering that forced so many into expensive mortgages that end in foreclosure, and undermine vital consumer protections enacted as part of the Dodd-Frank Wall Street Reform Act.”