House makes decision on points and fees bill

by MPA15 Apr 2015

The U.S. House of Representatives passed legislation yesterday that modifies regulations for home mortgages established in the 2010 Dodd Frank Wall Street Reform Act.

The Mortgage Choice Act of 2015, H.R. 685, passed 286-140, which was reintroduced by U.S. Rep. Bill Huizenga, R-Mich., earlier this year after dying in the last Congress despite bipartisan support.

The bill changes the way points and fees are calculated under the Qualified Mortgage (QM) rule. Under the regulation’s ability-to-repay (ATR) standards, QM cannot have points and fees more than 3% of the loan amount, which includes charges by affiliated settlement service providers.

The new legislation is proposing to exclude the cost of title insurance from points and fees on loans. It would also establish that funds held in escrow for property insurance payments aren’t considered points and fees.

The Mortgage Bankers Association (MBA) said the current definition of QM is problematic and “has the unintended effect of limiting the availability of affordable mortgage credit particularly to moderate-income and other families who require smaller loans under $150,000.”

The White House has already threatened to veto the bill over concerns “it would weaken key consumer protections and provisions of the Dodd-Frank Act.”

House members from both parties also voted, 263-162, to pass H.R. 650, which would change Home Ownership and Equity Protection Act (HOEPA) triggers and make a technical change on who is considered a loan officer.

The legislation would allow more low-balance loans to fit within the cap on points and fees under the HOEPA and clarify that manufactured home salespersons are not considered mortgage originators, provided they receive no compensation from a creditor, lender or mortgage broker, according to the MBA.

Rep. Maxine Waters D-Calif., the top Democrat on the House Financial Services Committee, previously supported a version of the H.R. 650 bill during the last session of Congress. However, she said Tuesday that recent “investigative reporting" from the Consumer Financial Protection Bureau indicates that consumers would be exposed to excessive risk.

"If enacted, H.R. 650 would allow abusive lenders to charge up to nearly 14% interest before consumer protections are triggered, more than four times the average borrower is paying on a home loan," Waters said. "There's not one member of Congress who would pay or is paying 14%, 12, 13, 11% interest. This is outrageous."

The White House has also threatened to veto this bill over concerns it, too, would weaken consumer protections and provisions of the Dodd-Frank Act. "Specifically, the bill would revise the Truth in Lending Act to allow manufactured housing lenders to raise the cost of loans to consumers without triggering existing rules designed to protect consumers from loans they cannot afford to repay."


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