Industry trade associations threw their weight behind the Mortgage Choice Act in a recent letter sent to the House of Representatives.
The bill, H.R. 1153, would make two adjustments to TILA’s definition of points and fees to “ensure greater consumer choice in mortgage and settlement services” under the Ability to Repay/Qualified Mortgage (QM) rule, the letter stated.
The bill has bipartisan sponsorship, with Republicans Bill Huizenga (R-Mich.), Ed Royce (R-Calif.), Steve Stivers (R-Ohio) and David Joyce (R-Ohio) joined by Democrats Gregory Meeks (D-N.Y.), David Scott (D-Ga.) and Mike Doyle (D-Pa.).
Among the requirements of the QM rule is that points and fees may not exceed 3 percent of the loan amount.
“The problem arises from the fact that, under current law and rules, what constitutes a ‘fee’ or a ‘point’ towards the points and fees cap varies greatly depending upon who is making the loan and what arrangements are made by consumers to obtain title insurance,” the letter states. “If the consumer chooses a title insurance provider that is affiliated with the lender, the title insurance charges count, but if the insurance is purchased from an unaffiliated title agency, the title charges do not count.
“In addition, escrowed homeowners insurance premiums may count as ‘points and fees’ due to ambiguous drafting in the law. The inclusion of either title insurance or escrowed homeowners’ premiums has caused many loans, especially those for low- and moderate-income consumers, to fail the QM test in situations where the consumer elected to use one stop-shopping. As a result, many otherwise qualified borrowers could not avail themselves of in house services and/or may have received a higher interest rate.”
An identical bill passed the House with greater than two-thirds vote in the last Congress, the letter also pointed out.
“H.R. 1153 endeavors to restore a full and open competitive market by clarifying the definition of fees and points. In doing so, the legislation will ensure consumers more choices in credit providers and settlement service options,” the letter states.
A total of 11 trade associations lent their support to the letter, including RESPRO and the National Association of Realtors, along with the Mortgage Bankers Association, the National Association of Homebuilders, and two credit union associations – the Credit Union National Association and the National Association of Federally-Insured Credit Unions.