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From Banking and Finance Law Daily, April 7, 2015

CBO estimates effect of proposed House bills affecting CFPB, TILA

By Colleen M. Svelnis, J.D.

The Congressional Budget Office has released its cost-benefit estimates for banking bills being considered in the House of Representatives.

H.R. 1265. The Bureau Advisory Commission Transparency Act (H.R. 1265) was introduced by Rep. Sean Duffy (R-Wis) and is intended to bring greater transparency and accountability to the Consumer Financial Protection Bureau by requiring all advisory committees established by the CFPB to comply with the Federal Advisory Committee Act (FACA). Among other things, the FACA sets out requirements for the qualifications of committee members, the timeliness and objectivity of advice provided to federal agencies, and the public availability of information about activities of advisory committees, including meeting notices, records, and minutes.

Based on information from the CFPB, the CBO has estimated that enacting H.R. 1265 would increase direct spending by less than $500,000 each year and about $1 million in total over the 2015-2025 period. The CBO noted that pay-as-you-go procedures apply.

H.R. 1529. The Community Institution Mortgage Relief Act (H.R. 1529) was sponsored by Rep. Brad Sherman (D-Calif) and would amend escrow and mortgage servicing requirements for smaller financial institutions by providing safe harbor for these financial institutions that hold loans in portfolio for three years. Under current law, mortgage lenders must establish escrow accounts for the payment of property taxes and certain insurance premiums related to the property securing the mortgage. H.R. 1529 would amend the Truth in Lending Act to exempt a lender from the requirement to hold those escrow funds if the lender has consolidated assets of $10 billion or less or if it holds the mortgage on its balance sheet for three years after the date of origination. H.R. 1529 also would direct the CFPB to exempt mortgage servicers from certain requirements related to, among other things, administering escrow accounts if they service 20,000 or fewer mortgage loans annually.

Based on information from the CFPB, the CBO has estimated that enacting H.R. 1529 would increase direct spending by less than $500,000 for expenses of the CFPB to prepare and enforce new rules to implement the legislation. Because enacting H.R. 1529 would affect direct spending, pay-as-you-go procedures apply.

The CBO estimates that enacting H.R. 1529 would not affect revenues. Implementing the bill would not affect spending subject to appropriation because the CFPB is permanently authorized to spend amounts transferred from the Federal Reserve System.

H.R. 650. H.R. 650, the Preserving Access to Manufactured Housing Act, was introduced by Rep. Stephen Fincher (R-Tenn) and would amend the Truth in Lending Act by adjusting the definitions of a mortgage originator and a “high-cost mortgage.” Under current law, employees of retailers of manufactured homes who do not accept residential mortgage loan applications, offer or negotiate terms of loans, or advise consumers on loan terms are excluded from the definition of mortgage originator. H.R. 650 would broaden the exception to include retailers of manufactured homes as well as their employees, as long as they do not receive more compensation for selling a home with a mortgage than they would for selling the same home for cash.

Based on information from the CFPB, the CBO has estimated that enacting H.R. 650 would increase direct spending by less than $500,000 for that agency to implement changes to the TILA. Because H.R. 650 would affect direct spending, pay-as-you-go procedures apply.

H.R. 1195. The Bureau of Consumer Financial Protection Advisory Boards Act (H.R. 1195) was sponsored by Rep. Robert Pittenger (R-NC) and would amend current law to establish three groups to provide advice to the CFPB. The boards would provide information to the CFPB about the practices of small businesses, credit unions, and community banks that offer financial products to consumers. The bill would create a small business advisory board to advise the CFPB. The bill would also codify two other advisory committees created by the bureau—the Credit Union Advisory Council and the Community Bank Advisory Council.

The CBO has estimated that implementing H.R. 1195 would increase direct spending by $9 million over the 2015-2025 period; therefore, pay-as-you-go procedures apply. The CBO also estimated that enacting the bill would not affect revenues or discretionary spending because the CFPB is permanently authorized to spend amounts transferred from the Federal Reserve System.

H.R. 685. The Mortgage Choice Act (H.R. 685) was introduced by Rep. Bill Huizenga (R-Mich) and is intended to provide clarity to the calculation of points and fees, allowing more loans to qualify as Qualified Mortgages and increasing options for borrowers. A Qualified Mortgage has certain characteristics that make the loan more affordable; borrowers who are eligible for such loans are presumed to be able to repay amounts owed. Under the Qualified Mortgage rules, certain costs that are incidental to the loan amount and are paid by the borrower—for example, title insurance fees, guarantee fees, and service charges—are limited to no more than 3 percent of the total loan amount. H.R. 685 would exclude insurance premiums held in escrow and, under certain circumstances, fees paid to companies affiliated with the creditor from the costs that would be considered in calculating the 3 percent limitation.

CBO has estimated that enacting H.R. 685 would affect direct spending; therefore, pay-as-you-go procedures apply. However, the CBO noted that it expects those effects to be “insignificant.” Enacting H.R. 685 would not affect revenues. Additionally, the CBO stated that implementing the bill would not affect discretionary costs because the CFPB is permanently authorized to spend amounts transferred from the Federal Reserve System.

H.R. 685 would direct the CFPB to amend its regulations related to qualified mortgages to reflect the new exclusions. Based on information from the bureau, the CBO does not expect that meeting the new requirement would have a significant effect on the agency’s workload or operating costs.

MainStory: TopStory BankingOperations CFPB Mortgages OversightInvestigations PrudentialRegulation TruthInLending

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