Politics & MoneyMortgage

House approves changes to TRID rule, loan originator licensing rules

Bill brings changes to SAFE Act rules for nonbank originators

The House of Representatives last night approved a bill that could bring big changes to the mortgage industry, including making it easier for loan originators to move from a traditional bank to a nonbank.

The bill would also bring changes to the Consumer Financial Protection Bureau’s Know Before You Owe mortgage disclosure rule, also called the TILA-RESPA Integrated Disclosures rule, or TRID.

The bill, H.R. 3978, passed Wednesday evening by a vote of 271-145. The bill contained five separate bills rolled up into one.

Included among the five bills in H.R. 3978 is the TRID Improvement Act, which deals with a title insurance issue and how its fees are presented on both the Loan Estimate and the Closing Disclosure forms that are part of TRID.

The bill also includes a change to the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act of 2008 that would allow loan originators to move from a bank to a nonbank and keep originating new mortgages without having to wait for a new license.

Under the current rules of the SAFE Act, an LO that moves between states or from a bank to a nonbank is required to wait for a new license before they can begin originating at their new job.

Contained in H.R. 3978 is a provision that would grant “transitional authority” to LOs who change corporate affiliation from a federally insured institution to a nonbank lender, or move across state lines, and allow them originate mortgages while they work to meet the SAFE Act’s licensing and testing requirements.

Under the bill, LOs would have 120 days to complete the SAFE Act licensing requirements.

A version of this provision passed out of the last Congress as well. In 2016, the House approved the SAFE Transitional Licensing Act of 2015, which contained the same rules for LO licensing.

The SAFE Act licensing changes also garnered bipartisan support this time around. The bill was authored by Rep. Steve Stivers, R-Ohio, and co-sponsored by Reps. Joyce Beatty, D-Ohio; Bruce Poliquin, R-Maine; and Kyrsten Sinema, D-Arizona.

Also included in H.R. 3978 is the TRID Improvement Act, which was originally introduced by Reps. French Hill, R-Arkansas, and Ruben Kihuen, D-Nevada, last year.

The TRID Improvement Act would allow for the calculation of the discounted rate title insurance companies may provide to consumers when they purchase a lenders and owners title insurance policy simultaneously and allow that information to be made available to homebuyers on TRID’s Loan Estimate and the Closing Disclosure forms.

According to Hill’s office, homebuyers in some states are not receiving an “accurate disclosure” of their title insurance premiums, because, in those states, the CFPB “does not allow the calculation of a discounted rate known as ‘simultaneous issue,’ which is a rate title insurance companies provide to consumers when they purchase a lenders and owners title insurance policy simultaneously.”

The TRID Improvement Act was supported by dozens of organizations in the mortgage space, including the Mortgage Bankers Association, the American Bankers Association, the American Land Title Association, the National Association of Home Builders, and others.

“Under current regulations, the CFPB does not permit title insurance companies to disclose available discounts for lender’s title insurance on the government mandated disclosure forms. This creates inconsistencies in mortgage documents and causes confusion for consumers,” the groups explained last year in a letter of support for the bill.

“H.R. 3978 would reduce this confusion by allowing title insurance companies to disclose available discounts and accurate title insurance premiums to consumers,” the groups add. “This straightforward fix would benefit consumers across the country.”

The TRID Improvement Act was initially entered in House records as H.R. 3978, but the bill was later expanded to include the SAFE Act changes and other measures addressing the financial services industry.

As stated above, the updated H.R. 3978 passed the House last night by a 271-145 margin.

The bill’s passage was welcomed by House Financial Services Committee Chairman Rep. Jeb Hensarling, R-Texas, and housing industry participants.

“These bills will help cut at least some of the red tape that places such a disproportionate burden on Main Street businesses and financial entities and limits consumer access to credit. These bills are practical, they are strongly bipartisan, and they are needed,” Hensarling said in a statement. “I applaud the sponsors of each of these commonsense regulatory relief bills for their hard work in bringing these bills to the floor.”

MBA President and CEO David Stevens also cheered the bill.

“I want to commend the House of Representatives for passing this package which includes H.R. 2948, which will maintain the important consumer protections established under the federal SAFE Act, while offering enhanced workforce mobility for mortgage loan officers. MBA is grateful for the leadership of the bill's author, Representative Steve Stivers, as well as its bipartisan original cosponsors: Representatives Beatty, Poliquin, and Sinema,” Stevens said in a statement.

“I also want to praise Representatives French Hill and Ruben Kihuen for Title I of the bill (the prior H.R. 3978) which will require the Consumer Financial Protection Bureau to allow the accurate disclosure of title insurance premiums and any potential available discounts to homebuyers,” Stevens continued.

“MBA now urges the Senate to take up these provisions as part of its bipartisan regulatory relief efforts,” Stevens concluded. “We look forward to continuing to working with policymakers on this and other issues impacting real estate finance.”

Michelle Korsmo, ALTA’s CEO, said that the TRID changes are welcome news to the title industry.

“Although the bill has been made part of a larger legislative package, the genesis of the bill is about improving transparency and making sure consumers receive disclosures that accurately show the cost of the one-time fee that protects their property rights,” Korsmo said.

“Our research shows that 40 percent of consumers feel confused by the CFPB’s requirement to provide inaccurate pricing on title insurance. We’re thankful for Representative French Hill championing a straightforward fix that benefits consumers across the country,” Korsmo added.

“This isn’t about limiting Dodd-Frank,” Korsmo concluded. “We’re eager to get this bill introduced and passed in the Senate and eliminate the inconsistencies in mortgage documents that cause confusion for consumers.”

The Community Home Lenders Association praised the LO portion of the bill.

“CHLA commends the House for adopting transitional licensing, a good first step in addressing the significant disparity between bank and nonbank mortgage loan originator qualifications requirements,” Scott Olson, executive director of the CHLA, said. 

H.R. 3978 now moves to the Senate.

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