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From Banking and Finance Law Daily, May 5, 2014

House Financial Services Committee marks up banking-related bills

By Colleen M. Svelnis, J.D.

The House of Representatives Committee on Financial Services will meet this week to markup the proposed legislation it plans to address, including the following banking-related bills.

Definition of mortgage originator. H.R. 1779, the “Preserving Access to Manufactured Housing Act of 2013” was introduced by Rep. Stephen Fincher (R-Tenn) on July 11, 2013, and would amend the Truth in Lending Act to modify the definitions of “mortgage originator” and “high-cost mortgage.” The bill would provide technical clarifications to the definition of a mortgage originator for purposes of the Truth in Lending Act. It would also amend the definition of a high cost mortgage and corresponding thresholds to ensure that consumers of small-balance mortgage loans will have access to mortgage credit.

Qualified mortgages rule liability concerns. H.R. 2673 is the “Portfolio Lending and Mortgage Access Act.” Representative Andy Barr (R-Ky) introduced the bill to ensure that consumers have access to credit when they choose to purchase a home. The bill’s purpose is to provide that residential mortgage loans held in a portfolio would qualify as qualified mortgages (QMs) for purposes of the presumption of the ability to repay requirements under the Truth in Lending Act.

The Financial Services Committee is responding to concerns that the Qualified Mortgage rule that went into effect in January 2014 can impact the ability of community financial institutions to offer mortgages to qualified applicants. The committee noted that a Federal Reserve Board report found that one-third of black and Hispanic borrowers would not meet the QM requirements of a loan based on its debt-to-income requirements.

The Independent Community Bankers Association (ICBA) supports this bill, which would provide community financial institutions (which frequently hold mortgage loans on portfolio) and other institutions the ability to be protected from the liability associated with Section 1411 of the Dodd-Frank Act as long as the loan appears on the institution’s balance sheet. The committee stated that it has received testimony that a lender could be forced to spend between $70,000 to $100,000 to defend itself against each claim that it violated Section 1411 of the Dodd-Frank Act. Because of this potential liability, many community financial institutions have stopped offering mortgages altogether, according to the committee.

Modification of points and fees definition. Representative Bill Huizenga (R-Mich) introduced H.R. 3211, the “Mortgage Choice Act of 2013,” on Sept. 28, 2013. The bill would amend the definitions provided for points and fees in connection with a mortgage transaction. The QM definition restricts the points and fees associated with a mortgage to three percent of the loan amount. This restriction has nothing to do with the borrower’s ability to repay the loan, according to the committee. H.R. 3211 would exclude from the calculation of points and fees insurance and taxes held in escrow and fees paid to affiliated companies as a result of their participation in an affiliated business arrangement. According to the committee, it has received testimony that providing these exclusions from the cap on points and fees will ensure that consumers can “continue to enjoy the convenience of one stop shopping should the consumer choose to receive a mortgage from a lender who provides consumers with products and services from an affiliated company.”

Duplicate and conflicting regulations. H.R. 4466, the “Financial Regulatory Clarity Act of 2014,” was introduced by Rep. Shelley Capito (R-WV) on April 10, 2014. This legislation would require the Federal Deposit Insurance Corporation, Office of Comptroller of the Currency, Federal Reserve Board, Bureau Of Consumer Financial Protection, National Credit Union Administration, Securities and Exchange Commission, and Commodity Futures Trading Commission to “assess whether any newly proposed regulation or order conflicts with, duplicates or is inconsistent with existing federal regulations,” and address any overlap or duplication before issuing the final rulemaking.

H.R. 4466 would also require regulators to evaluate whether existing regulations are outdated, and to submit a report to Congress making recommendations for repealing or amending any conflicting, inconsistent, duplicative, or outdated laws or regulations within 60 days of a proposed rulemaking.”

ICBA supports this bill that the industry group says would help streamline and modernize regulatory compliance for community banks (See Banking and Finance Law DailyApril 17, 2014).

Exemptions to mortgage servicing requirements. H.R. 4521, the “Community Institution Mortgage Relief Act of 2014,” was introduced by Rep. Blaine Luetkemeyer (R-Mo) on April 30, 2014, to address concerns that the CFPB’s final rules and guidance on escrow and mortgage servicing requirements are overly burdensome for community financial institutions.

H.R. 4521 would amend the Dodd-Frank Act to exempt community financial institutions from escrow requirements for loans held in portfolio. This bill also amends the Real Estate Settlement Procedures Act to instruct the CFPB to provide regulatory relief for servicers that annually service 20,000 or fewer mortgage loans, in order to reduce regulatory burdens while appropriately balancing consumer protections. The bill would also require a study of appropriate capital requirements for mortgage servicing assets for nonsystemic banking institutions.

MainStory: TopStory CFPB ConsumerCredit DoddFrankAct FederalReserveSystem Loans Mortgages TruthInLending

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