Mortgage

Mortgage Choice Act approved by House of Representatives

Bill to adjust TILA definition of points and fees passes House for third time

The House of Representatives voted Thursday to pass the Mortgage Choice Act of 2017, which would adjust the Truth in Lending Act’s definitions of points and fees under the Ability to Repay/Qualified Mortgage rule.

This is actually the third time that the House has passed a “Mortgage Choice Act” that contained similar provisions.

This version of the Mortgage Choice Act, H.R. 1153, is bipartisan legislation introduced by Rep. Bill Huizenga, R-Mich., Rep. Gregory Meeks, D-N.Y., Rep. Ed Royce, R-Calif., Rep. David Scott, D-Ga., Rep. Steve Stivers, R-Ohio, Rep. Mike Doyle, D-Penn., and Rep. David Joyce, R-Ohio.

Back in 2015, Huizenga first tried introducing the bill, H.R. 685, also called the Mortgage Choice Act. The 2015 version was identical to a bill introduced in 2013, However, both bills made it past the House, but died in the Senate. 

Now, the 2017 version of the Mortgage Choice Act is past the House as well, passing Thursday by a 280-131 margin.

The bill would remove the following from the points and fees calculation: title insurance purchased from a company affiliated with the lender; and escrowed homeowners insurance premiums. 

The National Association of Realtors, which expressed support for the bill earlier this week, said that the bill would help enhance competition in the mortgage and title insurance markets, and ensure consumers are able to choose the lenders and title providers best suited for their home buying needs.

Here’s more on the Mortgage Choice Act from NAR’s letter to Congress:

Currently, the QM rule discriminates against companies affiliated with real estate brokerages. For a mortgage to be a QM and receive safe harbor protections, the fees and points of the mortgage cannot exceed 3% of the loan amount. However, mortgage bankers and title companies affiliated with real estate brokerages are required to count more items towards the fees and points than large retail institutions. This puts these smaller firms at a competitive disadvantage.

According to Huizenga and House Financial Services Committee Chairman Rep. Jeb Hensarling, R-Texas, the bill will help more prospective homebuyers become actual homebuyers.

“I re-introduced the Mortgage Choice Act, bipartisan legislation to modify and clarify the way ‘points and fees’ are calculated and help families across America to one-stop shop,” Huizenga said in a statement.

“This legislation is narrowly focused to promote access to affordable mortgage credit without overturning the important consumer protections and sound underwriting required under Dodd-Frank’s ‘ability to repay’ provisions,” Huizenga continued. “These common-sense changes will help low and moderate income families as well as first-time homebuyers access affordable mortgage credit and experience the benefits of one-stop shopping by ensuring that safe, properly underwritten mortgages pass the qualified mortgage test.”

Hensarling said the bill is only necessary because of the “flawed” actions of the Consumer Financial Protection Bureau.

“The Mortgage Choice Act is needed because the CFPB wrote a flawed and problematic definition that grossly miscalculates points and fees, and the result is that many mortgage loans – particularly those for low and moderate-income borrowers – would not meet the standards of a Qualified Mortgage and thus not get made,” Hensarling said.

The Credit Union National Association also expressed support for the bill.

“The Mortgage Choice Act is a common-sense piece of legislation that would bring more consistency to the lending process, providing consumers with more access to mortgage credit and more choices in credit providers,” CUNA President and CEO Jim Nussle said. “This has seen bipartisan support in this and the previous Congress, and CUNA will continue our work to move it forward in the process.” 

The bill now heads to the Senate.

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