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From Banking and Finance Law Daily, November 19, 2015

House passes bills affecting CFPB’s auto financing, mortgage rules

By Colleen M. Svelnis, J.D.

The House of Representatives has passed two bills affecting the Consumer Financial Protection Bureau. H.R. 1737, the Reforming CFPB Indirect Auto Financing Guidance Act and H.R. 1210, the Portfolio Lending and Mortgage Access Act passed the House with strong support. H.R. 1737 passed by a vote of 332 to 96, and H.R. 1210 by a vote of 255 to 174.

According to the House Financial Services Committee, the CFPB “has created enormous uncertainty in the indirect auto lending market and threatens to increase the cost of buying automobiles” by issuing what those who oppose it call “flawed” guidance on this issue (CFPB Bulletin 2013-02) without a public notice and comment process. Committee Chairman Jeb Hensarling (R-Texas) said that the guidance “attempts to regulate compensation paid to auto dealers, despite auto dealers being specifically exempted in the Dodd-Frank Act from CFPB’s rulemaking.” Hensarling says the bureau “went far beyond clarifying existing law and instead is attempting to make new policy through this guidance,” calling it “an affront to due process, an affront to the rule of law and an affront to basic fairness.”

With regard to H.R. 1210, the committee release asserts that the CFPB’s mortgage rules “are making it more difficult for credit-worthy Americans to buy a home.” “It should not be the job of Congress or unelected and unaccountable Washington regulators to decide who gets a mortgage and who does not,” said Hensarling.

Representative Andy Barr (R-Ky), sponsor of H.R. 1210, responded to the passage with a statement saying “The one-size-fits-all, top-down Qualified Mortgage rule is preventing creditworthy Americans from the dream of homeownership, holding our economy back, and contributing to consolidation and closures among community banks and credit unions.”

Background on bills. H.R. 1737 would nullify the CFPB guidance and provide requirements for guidance issued by the bureau with respect to indirect auto lending. H.R. 1210 would amend the Truth in Lending Act to provide a safe harbor from certain requirements related to qualified mortgages for residential mortgage loans held in an originating depository institution's portfolio. Additionally, the bill would:

  • treat such a loan as a “Qualified Mortgage” for the purpose of all other relevant regulations; and
  • exclude loans that are later securitized and moved off portfolio from this protection.

Opposition remains for both. Critics say that H.R. 1737 would eliminate the Consumer Financial Protection Bureau’s ability to protect minority consumers from being charged abusive and predatory interest rates. Elijah E. Cummings (D-Md), Ranking Member of the House Committee on Oversight and Government Reform, spoke on the House floor in opposition to H.R. 1737 and noted that more than 60 organizations oppose the bill, including the National Association of Minority Auto Dealers, Center for Responsible Lending and the Leadership Conference on Civil and Human Rights. “The Consumer Financial Protection Bureau protects minority purchasers against auto dealers that seek to charge abusive and predatory markups,” said Cummings. “The purpose of the bill before us today is to eliminate this protection–leaving minority consumers at risk of being charged abusive and predatory interest rates.”

Nydia M. Velázquez (D-NY) also spoke in opposition to H.R. 1737, calling it an “attempt to obstruct the most important watchdog working on behalf of U.S. consumers.” Velázquez said auto financing is an area where the CFPB's role is “increasingly important.” She stated that the new restrictions “would be unique to the CFPB and would place unprecedented burden on the agency's issuance of guidance designed to help lenders comply with federal fair lending laws.”

Maxine Waters (D-Calif), Ranking Member of the Committee on Financial Services, led opposition to H.R. 1210, calling the passage a waste of time because President Obama has already pledged to veto the bills. The administration has released Statements of Administration Policy to this effect on both H.R. 1210 and H.R. 1737. Waters said the bill would allow lenders to deal in risky loans, would undermine important financial reforms, and put consumers and the economy at risk. According to Waters, H.R. 1210 “undermines the anti-predatory lending provisions of the Dodd-Frank Act and virtually eliminates one of the most significant consumer protection rules implemented by the CFPB. “

Waters asserted that the CFPB “is both a fierce consumer advocate and a fair regulator whose leadership has been praised by many in the banking industry. The CFPB is the kind of government success story Republicans can’t bring themselves to believe is possible.”

Industry reaction. The American Bankers Association has issued a statement by Executive Vice President of Congressional Relations and Political Affairs James Ballentine applauding the passage of H.R. 1210. “It’s clear that new regulatory requirements have restrained mortgage lending, and have made it particularly difficult for some creditworthy borrowers to obtain a home loan. This legislation is a common-sense approach that will help borrowers gain access to some of the lowest risk mortgage products offered by banks. Loans held in portfolio are well underwritten and conservative by their very nature—banks hold only the safest loans in portfolio. There is no need to create additional barriers for creditworthy borrowers for loans held in a bank’s portfolio.”

MainStory: TopStory CFPB ConsumerCredit EqualCreditOpportunity Loans Mortgages TruthInLending

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