Week ending February 9, 2018
H.R.1153 – Mortgage Choice Act of 2017
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)
Sponsor: Rep. Huizenga, Bill [R-MI-2] (Introduced 02/16/2017)
Status: Passed House /
VOTES and FLOOR ACTION
On Passage: On passage Passed by the Yeas and Nays: 280 – 131 (Roll no. 64).
Motion to recommit:
Text of the motion:
COST AND IMPACT
Cost to the taxpayers: CBO 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:
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
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
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
For these reasons, we oppose H.R. 1153.
Michael E. Capuano.
Nydia M. Velazquez.
Carolyn B. Maloney.
Stephen F. Lynch.
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