House Vote Today on Reg Relief Bill; MBA Sends Letter in Support
The House is scheduled today to vote on a broad regulatory relief bill already passed by the Senate. Ahead of the vote, the Mortgage Bankers Association sent a letter to House members urging their vote for the bill.
The House will consider S. 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act (https://www.congress.gov/bill/115th-congress/senate-bill/2155), as passed by the Senate in March as currently written with no amendments. Introduced by Senate Banking Committee Chairman Mike Crapo, R-Idaho, the bill passed the Senate with a filibuster-proof 67 votes on March 14.
In the letter to House leadership, MBA Senior Vice President of Legislative and Political Affairs Bill Killmer outlined MBA’s support for a number of the bill’s provisions, including:
–-SAFE Act amendments to provide 120 days of transitional authority for mortgage loan originators to originate when leaving a depository to join a sponsoring non-bank (or when crossing state lines). “Allowing for a transitional authority to originate promotes a fair, competitive, consumer-facing labor market by eliminating barriers to the ability of non-bank lenders (especially small lenders) to compete for talented loan officers,” Killmer said. “It would also allow loan officers to more easily move to the employer that offers them the best chance to succeed.”
—Added safeguards to protect veterans, surviving spouses and service members who utilize the VA Home Loan program’s Interest Rate Reduction Refinancing Loan (IRRRL) product. “While this streamlined product is a low-cost option that is well-suited for many borrowers, in some cases it has been used for serial re-financings, or churning, that strips equity and can put the borrower in a worse financial position,” Killmer wrote. “Section 309 advances multiple protections that MBA believes would help curtail this behavior.”
—Applying Truth in Lending Act consumer protections to PACE/energy efficiency mortgage products. “This is an important first step toward appropriately regulating PACE lending and ensuring that PACE borrowers are fully informed and protected from predatory lending practices,” MBA said. “Energy efficient home improvements, when financed with [PACE] loans have raised significant and well-documented, consumer protection concerns. These loans are in substance consumer loans secured by real property. Failure to pay a PACE loan can result in foreclosure and loss of the home. Nevertheless, federal mortgage financing rules established by the Consumer Financial Protection Bureau do not protect PACE borrowers, who instead are dependent on a patchwork of limited or non-existent state or municipal laws.”
–An improved, more workable regulatory regime for eligibility of High Volatility Commercial Real Estate (HVCRE) construction loans. “As currently written, the regulatory HVCRE rule is not sufficiently clear,” MBA said. “This matters because ADC commercial real estate projects play a substantial role in supporting jobs and economic growth, and banks are critical sources of capital for that sector…MBA supports these changes because they would clarify the HVCRE rule and make it more workable, better enabling banks to support prudent ADC projects that contribute to economic growth.”
—Partial TILA-RESPA Integrated Disclosure (TRID) and Home Mortgage Disclosure Act relief. The bill asks the Bureau of Consumer Financial Protection to provide clearer, authoritative guidance on several components of the TRID Rule. “This clarity is critical,” MBA said. “The current uncertainty with respect to these issues presents a significant and unnecessary impediment to mortgage industry participants’ efforts to comply with the TRID Rule.”
—Home Mortgage Disclosure Act Adjustment and Study. The bill amends HMDA to expand exemptions on itemized disclosures added by the Dodd-Frank Act. The proposed bill exempts from these disclosures closed-end mortgages and open-end lines of credit for those banks and credit unions who originate fewer than 500 closed-end mortgages or 500 open-end lines of credit in the last two years, respectively. “While we support the spirit behind raising the threshold for banks and credit unions, we believe extending the exemption to include all small mortgage originators, including small independent mortgage banks, would better serve consumers and the marketplace,” MBA said. “Such an exemption would reduce the regulatory burden placed upon all smaller community lenders by increased HMDA reporting requirements.”
–Credit Score Competition. MBA said it appreciates inclusion of provisions that encourage competition in the development and usage of credit scoring models for residential mortgages. “Heightened competition should produce more accurate modeling, which in turn provides a variety of benefits for consumers, lenders and investors,” the letter said. “MBA also supports transparent model validation processes that ensure a level playing field for all providers of credit scoring models.”
There are numerous operational challenges associated with any transition in credit scoring models-including both updates to existing models and the adoption of new models developed by entrants to the market. Any policies that guide such
—Minimum Standards for Residential Mortgage Loans. The Bill extends “Qualified Mortgage” status to loans originated by, and retained in the portfolios of, banks and credit unions with less than $10 billion in consolidated assets. This expansion of QM status would not apply to loans with interest-only or negative-amortization features, points and fees above the existing cap of 3 percent of the loan amount, or prepayment penalties that are in violation of existing QM requirements.
“While MBA appreciates the intent of this provision and has consistently viewed the current QM standard as overly restrictive, we are concerned that this provision would create a distorted market for otherwise similar loans, particularly with respect to the charter of the originator,” the letter said. “Efforts to improve upon the QM standard should, to the greatest extent possible, be undertaken in a manner that preserves a level playing field for all types of lenders. MBA therefore recommends revisions to this section that would extend QM status to loans originated by any lender, provided that they are transferred to, and subsequently held in the portfolio of, a community bank or credit union within 90 days of their origination. Such a revision would provide more opportunities for QM loans to be originated by various types of lenders while retaining the core objective of ultimate risk retention by small, community-based institutions.”
