As the Mortgage Choice Act went to the House floor on April 14, several organizations sent letters to the U.S. House of Representatives to express their opinion of the legislation.
The Mortgage Bankers Association released a letter to the Speaker John Boehner and Minority Leader Nancy Pelosi expressing their support of the Mortgage Choice Act. The letter, dated April 13, was sent in anticipation of the House vote on the legislation.
The Mortgage Choice Act of 2015 was introduced by Rep. Bill Huizenga (R-Mich.) and would amend and clarify the Dodd-Frank Wall Street Reform and Consumer Protection Act’s qualified mortgage (QM) definition in order to improve access to credit and QMs for low and moderate income borrowers. The reformed definition also would protect consumers from bad loans. QMs were established by the Dodd-Frank Act as a way for mortgage lenders to satisfy the “ability to repay” requirements and provides that points and fees in excess of 3 percent of the loan amount are prohibited.
Further, the Mortgage Choice Act would modify the Truth in Lending Act’s (TILA) definition of points and fees by exempting any affiliated title charges and escrow charges for taxes and insurance from the QM cap. Currently, points and fees include fees paid to affiliated title companies as well as insurance and taxes held in escrow. Unaffiliated title companies are not subject to this rule.
In the letter, MBA states that the definition causes many affiliated loans, especially those for low-and moderate income borrowers, to not qualify as QMs and either would not be made or only would be available at higher interest rates because of the heightened liability risks. Thus, the MBA argues that the definition is to the disadvantage of those borrowers who would need assistance the most and force them to “lose the ability to choose to take advantage of the convenience and market efficiencies offered by one-stop shopping.”
“By amending the definition of points and fees in this manner, the legislation will: (1) promote the availability of safe and affordable mortgage credit; (2) maintain a competitive marketplace, (3) prevent higher prices or the withdrawal of affiliated title service providers in low- and moderate-income marketplaces; and (4) preserve the ability of consumers to choose the benefits of one-stop shopping when they purchase or refinance their home,” MBA Chairman and CEO David Stevens said in the letter.
MBA urged the House members to support the Mortgage Choice Act, which it said “would help improve the regulatory environment in a way that helps consumers gain access to sustainable mortgage credit.”
On the same day, nine other financial and housing groups also expressed support for the Mortgage Choice Act in a letter to members of the House. Those who undersigned the letter, which is nearly identical to the MBA letter, included: the National Association of Federal Credit Unions, the Mortgage Lenders Association, the Consumer Mortgage Coalition, the Credit Union National Association, the National Association of Home Builders, the Real Estate Services Providers Council, the Realty Alliance and the National Association of Realtors.
A majority of Representatives apparently agreed with this assessment, given that the bipartisan bill passed in the House 286-140.
"The American dream for so many low-and moderate-income Americans is that one day they can achieve financial independence,” said House Financial Services Committee Chairman Jeb Hensarling, (R-Texas). “We are trying to ensure that low- and moderate-income Americans have convenience, that they have choice, that they have lower prices.”
The bill’s sponsor obviously agreed with this assessment.
“A qualified mortgage is the gold standard of home loans. Hardworking families should not be denied access to a qualified mortgage because of technicalities that are largely out of their control," Huizenga said following the passage of the bill. “The Mortgage Choice Act enacts commonsense reforms to Dodd Frank making it possible for low-and middle-income families to achieve a portion of the American Dream. I am glad to see strong bipartisan support for the effort to make homeownership an attainable goal.”
There are still dissenting opinions, on the other hand, including that of Rep. Maxine Waters (D-Calif.), who said that the bill would reverse vital Dodd-Frank consumer protections and leave many families, especially those who are low-income or minorities, exposed to predatory practices that were common before the housing market crash in 2008.
“I strongly oppose both of these proposals, which will weaken the Consumer Financial Protection Bureau, roll back key protections for homeowners and leave consumers vulnerable to the same kinds of predatory lending practices that were all too common leading up to the financial crisis,” Waters said. “Watering down important protections enacted in the aftermath of the worst financial crisis in a generation will ultimately bring back higher costs for borrowers, facilitate the kind of steering that forced so many into expensive mortgages that end in foreclosure, and undermine vital consumer protections enacted as part of the Dodd-Frank Wall Street Reform Act.”
Waters is not alone in this opinion. In another April 13 letter, the president and CEO of the Leadership Conference on Civil and Human Rights, Wade Henderson, and Executive Vice President Nancy Zirkin urged House Representatives to vote against the “rollback of predatory lending laws.”
The Mortgage Choice Act “would also open the door to new predatory lending practices that Dodd-Frank was meant to eliminate,” Henderson said. “It would create a new loophole in the CFPB’s Qualified Mortgage rule, by excluding fees paid to lender-affiliated title companies from the rule’s 3 percent cap on points and fees. Exempting these loan fees from the cap would cost borrowers hundreds, if not thousands, of dollars in unforeseen mortgage costs, undermining the purpose of the Qualified Mortgage rule.”
The most powerful dissenting opinion, however, is President Barack Obama, who has threatened to veto the bill. Like others opposed to the bill, Obama has stated that the Mortgage Choice Act would undermine the Dodd-Frank Act’s financial reforms and open consumers to the same abuses that occurred before the market crash.
This is the second go-around for the Mortgage Choice Act, which was reintroduced after it last year passed the House but died in the Democrat-controlled Senate without a vote. The bill is said to have Democratic detractors in the Senate, including Elizabeth Warren, but with Republican control of the chamber could come to a vote this year.