[Update: 04/14/15 6:31 p.m. ET – Added response from Waters' spokesperson]
A bill to reform mortgage industry regulations hit the floor of the House of Representatives Tuesday afternoon, and one of its most vocal critics was in the odd position of opposing a bill that she supported just eight months ago in a letter to the Senate.
Congresswoman Maxine Waters, D-Calif., said in a written statement Tuesday and on the House floor that she opposed H.R. 685, the Mortgage Choice Act of 2015, which was reintroduced earlier this year after dying in the last Congress despite bipartisan support. The other bill in debate was H.R. 650, the Preserving Access to Manufactured Housing Act, which she also spoke against.
“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 in a written statement.
“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," Waters added. "I join a broad coalition representing manufactured housing owners, civil rights groups, independent title insurers, academics and consumer advocates in opposing both of these measures.”
But on August 1, Waters signed a letter to then Senate Majority Leader Harry Reid, D-Nev., and members of the Senate Banking Committee urging them to take up the Mortgage Choice Act of 2014, which is virtually identical to the Mortgage Choice Act of 2015.
A copy of the letter can be read here.
The Mortgage Choice Act of 2015 by U.S. Rep. Bill Huizenga, R-Mich., — like the Mortgage Choice Act of 2014 – 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 of 2015 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.
A committee spokesperson said that despite the text of the letter, Waters’ support was qualified, and that the only time there was a recorded vote for this provision was on the floor – in the form of H.R. 5461 from September of 2014, she was recorded as voting against it.
“When this bill came before our Committee and on the floor last year as HR 3211, the Ranking Member expressed a willingness to support measure with the understanding that more work needed to be done to get the bill ready for final passage, including more consultation with the Senate,” the spokesperson said. “In fact, consumer groups and mortgage lenders were trying to further work on compromise language to get the bill to a place where it could be acceptable. However, those talks fell apart. In the end, lenders simply wanted the ability to steer borrowers to affiliated title companies and benefit from the enhanced profits that entailed. And they wanted to do this while also receiving the legal safe harbor afforded by the Qualified Mortgage status. She then opposed it.”
In the August letter, Waters praised the bill for some of the what she condemned Tuesday.
“We support the Mortgage Choice Act because of our concern about lower-income consumers’ access to credit and their ability to select the mortgage and title insurance providers of their choice,” the letter states. It was signed by Waters and 11 other members of Congress. “We urge you and the entire Senate to quickly adopt the Mortgage Choice Act to improve access to credit, enhance competition among title insurance providers, and reinforce the CFPB’s authority to define what title insurance costs qualify as excludable “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.
House Financial Services Committee Chairman Jeb Hensarling, R-Texas, said he was surprised at the contention over what he said is a bipartisan bill.
“…Mr. Speaker, this is an incredibly modest but still important bill. By definition if it is bipartisan it’s going to be modest. I’m somewhat shocked that under our rules and procedures that this would not be on the suspension calendar. In fact, in the last Congress there was not one single vote cast to object to this bill from the gentleman from Michigan, Mr. Huizenga, the Chairman of our Monetary Policy and Trade Subcommittee – a real leader on housing opportunity for low and moderate income Americans on our committee,” Hensarling said.
“Not a single dissenting vote, but I guess that was before, again, the left hand knew what the far left hand was doing,” Hensarling said. “Now all of a sudden we’ve entered yet another fact-free zone and we’re having all of this incredible verbiage about Wall Street when all this bill is doing is leveling the playing field between those firms that would be affiliated and those that would not so consumers can have a few more choices and benefit from lower costs as they try to get their American dream.”