Week ending December 8, 2017
H.R.3971 – Community Institution Mortgage Relief Act of 2017
H.R. 3971 would amend the Truth in Lending Act to exempt a lender from the requirement to hold escrow funds if that lender has consolidated assets of $25 billion or less and if it holds the mortgage on its balance sheet for three years from the date of origination.
“Under current law, most mortgage lenders must establish escrow accounts to pay property taxes and certain insurance premiums for properties that secure “high-priced mortgages”—those that have interest rates exceeding certain thresholds.” – cbo
The bill also directs the Bureau of Consumer Financial Protection to exempt mortgage servicers from certain requirements related to, among other things, administering escrow accounts if they service 30,000 or fewer mortgage loans annually.
(Full text of H.R. 3971 congress.gov)
Sponsor: Rep. Tenney, Claudia [R-NY-22] (Introduced 10/05/2017
Status: Passed House /
VOTES and FLOOR ACTION
On Passage: On passage Passed by the Yeas and Nays: 294 – 129 (Roll no. 675)
An amendment, offered by Mr. Sherman, numbered 1 printed in Part B of House Report 115-443 to lower the amount of consolidated assets of a creditor eligible for the safe harbor from escrow requirements in the bill from $25,000,000,000 or less to $10,000,000,000 or less; lowers the number of loans that a mortgage servicer eligible for exemptions and adjustments from the Bureau can service annually from 30,000 or fewer mortgage loans to 20,000 or fewer mortgage loans. On agreeing to the Sherman amendment; Agreed to by voice vote
Motion to recommit: On motion to recommit with instructions Failed by the Yeas and Nays: 190 – 233 (Roll no. 674).
Text of the motion:
The House proceeded with 10 minutes of debate on the Titus motion to recommit with instructions. The instructions contained in the motion seek to require the bill to be reported back to the House with an amendment adding a new section pertaining to Protecting Consumers from Excessive Housing Costs and Predatory Lenders.
COST AND IMPACT
Cost to the taxpayers: Using information from CFPB, CBO estimates that enacting H.R. 3971 would increase direct spending by less than $500,000 for CFPB to update its guidance documents.
Pay-as-you-go requirements: Because the bill affects direct spending, pay-as-you-go procedures apply. Enacting the bill would not affect revenues.
Regulatory and Other Impact: H.R. 3971 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act.
Dynamic Scoring: CBO estimates that enacting H.R. 3971 would not increase net direct spending or on-budget deficits in any of the four consecutive 10-year periods beginning in 2028.
Tax Complexity: Not applicable to this bill.
Earmark Certification: With respect to clause 9 of rule XXI of the Rules of the House of Representatives, the Committee has carefully reviewed the provisions of the bill and states that the provisions of the bill do not contain any congressional earmarks, limited tax benefits, or limited tariff benefits within the meaning of the rule.
Duplication of programs: In compliance with clause 3(c)(5) of rule XIII of the Rules of the House of Representatives, the Committee states that no provision of the bill establishes or reauthorizes: (1) a program of the Federal Government known to be duplicative of another Federal program.
Direct Rule-Making: Pursuant to section 3(i) of H. Res. 5, (115th Congress), the following statement is made concerning directed rulemakings: The Committee states that the bill requires one directed rulemaking.
The rulemaking directs the Bureau of Consumer Financial Protection to provide exemptions to, or adjustments for, the provisions of Section 6 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605) for a servicer that annually services 30,000 or fewer mortgage loans. Doing so will reduce regulatory burdens on community financial institutions while appropriately balancing consumer protections.
Advisory Committee Statement: No advisory committees within the meaning of section 5(b) of the Federal Advisory Committee Act were created by this legislation
Budget Authority: Data not available
Constitutional Authority: Assumed.
H.R. 3971, the “Community Institution Mortgage Relief Act,” would amend the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) to adjust the size of two exemptions that the Consumer Financial Protection Bureau (Consumer Bureau) has already provided for smaller-sized institutions on escrow accounts for higher-priced mortgage loans and servicing requirements for small mortgage servicers.
Under H.R. 3971, escrow accounts would no longer be required for riskier, high-priced loans at institutions with less than $25 billion in assets, a dramatic increase from the current $2 billion asset threshold. The bill would also raise the “small servicer exemption” for increased notification requirements to consumers from servicers with 5,000 mortgage loans to those with 30,000 mortgage loans.
High-priced mortgage loans are essentially loans with higher interest rates that reflect riskier or subprime borrowers. H.R. 3971 would enable larger servicers, whose incentives are neither aligned with owners of the loans nor the borrowers, to potentially revive some of the abusive practices involved with predatory lending that contributed to the 2007-2009 financial crisis.
Relatedly, escrow accounts are an important consumer protection mechanism that ensure that homeowners have funds for recurring homeownership-related expenses, such as property taxes and insurance. As such, these accounts are a crucial tool for some homeowners to reduce their risk of mortgage defaults by guaranteeing that the funds are available every month.
Furthermore, the Consumer Bureau has servicing rules that were designed to address the fact that large servicers, and especially servicers that serviced loans they did not own for an extended period of time, often do not adequately communicate with customers, or appropriately track paperwork. During the 2007-2009 financial crisis, this problem contributed to millions of unnecessary foreclosures and several billion dollar settlements for abusive and fraudulent business practices. The increase in the exemption under the bill would allow too many larger bank servicers to avoid important consumer safeguards.
For all of the reasons discussed above, we oppose H.R. 3971.
Nydia M. Velazquez.
Stephen F. Lynch.
Wm. Lacy Clay.
Daniel T. Kildee.
Al Green (TX).
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