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From Banking and Finance Law Daily, March 27, 2015

Regulatory relief bills cleared for House votes

By John M. Pachkowski, J.D.

Following a markup hearing that spanned two days, the House Financial Services Committee has cleared a package of 11 bills that are intended to bring regulatory relief to the banking industry, especially community banks.

Avalanche of new rules. At the start of the hearing, Committee Chairman Jeb Hensarling (R-Texas) noted, “These bills—all of them, again, sponsored and co-sponsored by Republicans and Democrats alike—either passed the House or this committee during the previous Congress. In fact, 9 of these 11 bills we will consider passed the House or this committee without any opposing vote at all. In other words, no Member voted against them. So it is difficult, perhaps even impossible, to be more bipartisan or less controversial than these 11 bills that we consider today.”

He continued, “Witness after witness has come before our committee over the last several years to speak about the weight, the volume, the complexity, the cost and uncertainty of Washington regulations. One community banker who appeared before our committee last week called this ‘an avalanche of new rules.’ It is not an exaggeration to say that America’s community financial institutions are withering on the vine. Our nation is now losing, regrettably, on average more than one community financial institution a day and they are not perishing from a natural death.”

Trojan horse. On the other hand, Rep. Maxine Waters (D-Calif), the Committee’s Ranking Member, said in her opening statement, “I am skeptical of efforts to co-opt community banks to enact broader, more harmful changes. The biggest banks continue using community banks as a Trojan horse to dismantle critical consumer protection and financial stability laws enacted in the aftermath of the worst financial crisis in a generation.

She added, “In addition, a number of the measures we will consider would propose nominal changes related to the highly successful Consumer Financial Protection Bureau. We want to be reasonable and work with the majority in a bipartisan manner on these measures. But again, it’s difficult to consider these technical changes to the CFPB when the Republican budget resolution on the floor this week would likely strip the Bureau of its funding—and when this Committee has adopted a policy of reflexive, unilateral subpoenas from the chair. Mr. Chairman, it is simply hard to believe that we can earnestly improve that which you are currently attempting to dismantle.”

Undercut community protections. Prior to the markup, Americans for Financial Reform released a letter expressing its opposition to most of the bills to be voted upon. The advocacy group noted that many of the bills “would undercut important community protections—the same type of environment that allowed a devastating housing crisis to develop. Others undermine or put barriers in front of the work of the Consumer Financial Protection Bureau (CFPB), and are part of a strategy to weaken the CFPB—and are driven by financial sector interests that want to disrupt the good work the Bureau is doing preventing financial tricks and traps.”

Committee results. The following bills are now cleared for consideration by the House of Representatives:

H.R. 299, the Capital Access for Small Community Financial Institutions Act, introduced by Rep. Steve Stivers (R-Ohio), would allow privately insured state chartered credit unions to apply for membership in the Federal Home Loan Bank System, which would help them better serve the financial needs of consumers. The Financial Services Committee approved the bill by a vote of 56-1. The bill passed the House by a vote of 395-0 during the 113th Congress.

H.R. 601, the Eliminate Privacy Notice Confusion Act, was sponsored by Rep. Blaine Luetkemeyer (R-Mo) and would amend the Gramm-Leach-Bliley Act by eliminating the current requirement that financial institutions have to mail all customers annual privacy notices explaining information sharing practices even when a financial institution’s privacy policies have not changed. The Financial Services Committee approved the bill by a vote of 57-0. The House passed a similar bill by voice vote during the 113th Congress.

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 to ensure that consumers can continue to have access to manufactured housing by altering the definition of a “high-cost mortgage.” The Financial Services Committee approved the bill by a vote of 43-15. The bill passed the committee by voice vote during the 113th Congress.

After the vote, Fincher stated, “New regulations that don’t recognize the uniqueness of the manufactured housing industry are taking housing options off the table for American families and negatively impacting those whose livelihood is connected to the industry. Today’s vote puts us one step closer to providing financing options and regulatory relief to the families and individuals in the industry who rely on manufactured housing. I look forward to the full House passing this important bill as soon as possible.”

H.R. 685, the Mortgage Choice Act, 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. The Financial Services Committee approved the bill by a vote of 43-12. The bill passed the House by voice vote during the 113th Congress.

H.R. 1195, the Bureau of Consumer Financial Protection Advisory Boards Act, was sponsored by Rep. Robert Pittenger (R-NC) and 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 Financial Services Committee approved the bill by a vote of 53-5. The committee passed the bill by voice vote during the 113th Congress.

H.R. 1259, the Helping Expand Lending Practices (HELP) in Rural Communities Act, was introduced by Rep. Andy Barr (R-Ky) and would provide individuals in rural areas the right to petition the Consumer Financial Protection Bureau for the area to be reclassified as “rural,” thereby relieving local community banks and credit unions from burdensome regulations that unfairly limit their ability to lend and help create jobs in their communities. The Financial Services Committee approved the bill by a vote of 56-2. The bill passed the House by voice vote during the 113th Congress.

A Senate version was recently introduced by Senate Majority Leader Mitch McConnell (R-Ky).

H.R. 1265, the Bureau Advisory Commission Transparency Act, was introduced by Rep. Sean Duffy (R-Wis) and is intended to bring greater transparency and accountability to the CFPB by subjecting it to the Federal Advisory Committee Act. The Financial Services Committee approved the bill by a vote of 56-2. This bill passed the committee by voice vote during the 113th Congress.

Duffy noted, following the vote, “The CFPB promises transparency, but practices secrecy. They promised they were ‘opening these full meetings to the public’ but they’ve gone back on their word.”

H.R. 1367 was introduced by Rep. Amata Radewagen (R-American Samoa) and would clarify and extend the Expedited Funds Availability Act’s application to U.S. territories, thereby improving check-clearing wait times in American Samoa and the Northern Mariana Islands. The Financial Services Committee approved the bill by a vote of 58-0. The bill passed the House by voice vote during the 113th Congress.

H.R. 1408, the Mortgage Servicing Asset Capital Requirements Act, was sponsored by Rep. Ed Perlmutter (D-Colo) and would direct the federal banking agencies to conduct a study to determine the appropriate capital requirements for mortgage servicing assets for community financial institutions. The Financial Services Committee approved the bill by a vote of 49-9. The bill passed the committee 44-9 during the 113th Congress.

H.R. 1480, the SAFE Act Confidentiality and Privilege Enhancement Act, was introduced by Rep. Robert Dold (R-Ill) and would amend the Secure and Fair Enforcement of Mortgage Licensing Act of 2008 to allow state and federal financial regulators to share information regarding consumer financial services businesses that are licensed at the state level in the Nationwide Mortgage Licensing System and Registry (NMLS) without the loss of privilege or confidentiality protections provided by state and federal law. The Financial Services Committee approved the bill by a vote of 58-0. The bill passed the House by voice vote during the 113th Congress.

Dold noted, “Illinois has the second-most community banks of any state, and these bipartisan solutions will ensure our local banks are able to focus less on Washington regulation and more on supporting local businesses and families.” He added, “The overwhelming bipartisan support for these 11 commonsense reforms proves what Congress can achieve when we set aside our partisan differences and work for the people we represent.”

H.R. 1529, the Community Institution Mortgage Relief Act, sponsored Rep. Brad Sherman (D-Calif) 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. The Financial Services Committee approved the bill by a vote of 48-10. The bill passed the committee 43-16 during the 113th Congress.

Moving the pendulum. Following the committee’s votes, Rep. Randy Neugebauer (R-Texas), Chairman of the Financial Institutions and Consumer Credit Subcommittee, commented, “Today, the Financial Services Committee has begun to move the pendulum closer to the direction of reasonable regulation by taking the first step to address much-needed regulatory relief for our Main Street financial institutions and the consumers they serve.”

Pittenger echoed the sentiments of Chairman Neugebauer by noting, “The pendulum of regulation has swung too far, and too often, small businesses, credit unions, and community banks are the collateral damage. He added that his bill “will ensure that CFPB regulators aren’t just listening to high-priced lawyers and lobbyists, but are actively engaged with the small business owners, community banks, and credit unions that are vital for job creation and Main Street growth.”

Right-sized framework. Commenting on the passage of H.R. 1259 and H.R. 1480, the Conference of State Bank Supervisors noted that “CSBS and state regulators see a need for policymakers to continue efforts to ensure we have a right-sized and appropriate regulatory framework that meets the needs of local communities and that recognizes the relationship-lending business model. H.R. 1259 supports community bank portfolio lending and creates a flexible process for local input.” The CSBS added that H.R. 1480 “allows for NMLS to bring greater uniformity and transparency to a broad range of state-licensed financial services industries while maintaining and strengthening the ability of state regulators to monitor these industries.”

Companies: Americans for Financial Reform; Conference of State Bank Supervisors

MainStory: TopStory BankingOperations CapitalBaselAccords CFPB ChecksElectronicTransfers DoddFrankAct Mortgages OversightInvestigations Privacy PrudentialRegulation RESPA TruthInLending

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