H.R.1153 – Mortgage Choice Act of 2017

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Week ending February 9, 2018

H.R.1153 – Mortgage Choice Act of 2017

Brief

H.R. 1153 would exclude insurance premiums held in escrow and fees paid to companies affiliated with the creditor from the costs that would be considered in determining whether a loan is a qualified mortgage or a high-cost mortgage.

“Under current law, a “qualified mortgage” has certain characteristics that make it more affordable. Borrowers who are eligible for such loans are presumed to be able to repay amounts owed, and lenders are provided certain legal protections when issuing such mortgages. To meet the qualified-mortgage definition, certain costs that are incidental to the loan and that are paid by the borrower—for example, title insurance fees, guarantee fees, and service charges—cannot exceed 3 percent of the total loan amount. Lenders offering “high-cost mortgages” (home mortgages with interest rates and fees that exceed certain thresholds) must make certain additional disclosures to borrowers and must comply with restrictions on the terms of such loans.” – cbo

 (Full text of H.R. 1153 congress.gov)

SponsorRep. Huizenga, Bill [R-MI-2] (Introduced 02/16/2017)

Status: Passed House /

VOTES and FLOOR ACTION

HOUSE

On Passage: On passage Passed by the Yeas and Nays: 280 – 131 (Roll no. 64).

House Amendments:

Motion to recommit:

Text of the motion:

SENATE

On Passage:

Procedural Actions:

Senate Amendments:

COST AND IMPACT

Cost to the taxpayersCBO estimates that enacting H.R. 1153 would increase direct spending by less than $500,000 for the agency to update its guidance documents.

Pay-as-you-go requirements:  Because H.R. 1153 would affect direct spending, pay-as-you-go procedures apply. Enacting the bill would not affect revenues

Dynamic Scoring:   CBO estimates that enacting H.R. 1153 would not increase net direct spending or on-budget deficits in any of the four consecutive 10-year periods beginning in 2028

Regulatory and Other Impact: H.R. 1153 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act.

Tax Complexity:  Not applicable to this bill.

Earmark Certification:  Data not available

Duplication of programs: Data not available

Direct Rule-Making:  Data not available

Advisory Committee Statement: Data not available

Budget Authority: Data not available

Constitutional Authority:   Assumed.

 

More Bill Information:

MINORITY VIEWS

 

H.R. 1153, the Mortgage Choice Act of 2017, would amend the

Truth in Lending Act (“TILA”) to exempt certain affiliated

businesses from the definition of “points and fees” under the

Dodd-Frank Wall Street Reform and Consumer Protection Act’s

(“Dodd-Frank Act”) “qualified mortgage” (“QM”)

definition. This bill would return consumers to the days before

the enactment of the Dodd-Frank Act, when the true cost of a

loan–inclusive of all costs and fees that the borrower would

incur–could be obscured on mortgage documents, and before all

lenders had to make sure that borrowers actually had the

ability to pay back the full cost of a mortgage when it was

originated.

The 2007-2009 financial crisis was triggered, in part, by

predatory mortgage lending and the widespread availability of

subprime mortgages with little verification or analysis of

borrower income or assets, meaning that neither lenders nor

borrowers knew if borrowers could actually afford to repay

their loans. The impact of this lack of analysis came into play

when interest rates rose and property values declined, causing

many borrowers to experience payment shock that led to mortgage

default and ultimately foreclosure.

An essential piece of the Dodd-Frank Act is Section 1411,

which amends TILA and establishes an “ability to repay”

(“ATR”) standard for residential mortgage loans. This helps

to ensure that creditors conduct reasonable and good faith

determinations, based on verified and documented information

that, at the time a loan is made, a borrower actually has a

reasonable ability to repay the loan, including all applicable

taxes, insurance, and assessments for it.

This vital provision lays the groundwork to make sure

consumers and the economy are better protected. Section 1412 of

the Dodd-Frank Act further creates a safe harbor and rebuttable

presumption for creditors to demonstrate that they have

complied with ATR duties by satisfying certain factors, which

allows them to classify a residential mortgage loan as a QM

loan. The underwriting standards for QM loans are intended to

reduce the risk that a borrower will default on the loan.

One of the QM standards prohibits the imposition of upfront

fees that exceed three percent of the total loan amount. This

three percent cap is in place to ensure that borrowers are

actually paying for the underlying mortgage, and not high,

unnecessary expenses. H.R. 1153 would modify the points and

fees calculation for QM loans to exclude from this three

percent amount charges for title services of firms affiliated

with the lender. The bill does not impose any limitations on

the costs relating to title services that could be charged as

upfront fees for QM loans. For this reason, the bill would

create a significant loophole in the upfront points and fees

cap created under the Dodd-Frank Act, allowing borrowers to be

charged high costs for title insurance, costs they may not have

budgeted for.

Furthermore, when this legislation moved through the 114th

Congress as H.R. 685, the Obama Administration issued a veto

threat, stating that the measure “[risked] eroding consumer

protections and returning the mortgage market to the days of

careless lending focused on short-term profits.”\1\ We agree

with this assessment with respect to H.R. 1153, and believe

that it would be irresponsible to weaken ATR standards so that

affiliated title companies have a chance to charge additional

upfront fees.

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\1\https://obamawhitehouse.archives.gov/sites/default/files/omb/

legislative/sap/114/saphr685r_20150413.pdf

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For these reasons, we oppose H.R. 1153.

 

Maxine Waters.

Keith Ellison.

Gwen Moore.

Michael E. Capuano.

Nydia M. Velazquez.

Carolyn B. Maloney.

Al Green.

Stephen F. Lynch.

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