The U.S. House of Representatives on Feb. 8 passed U.S. Rep. Bill Huizenga’s (R-MI) Mortgage Choice Act of 2017, H.R. 1153, a bipartisan measure to help ease the home-buying process for low- and middle-income Americans.
If enacted, H.R. 1153 would amend how mortgage transaction points and fees are calculated under the Truth in Lending Act of 1968 and specify that “neither escrow charges for insurance nor affiliated title charges shall be considered ‘points and fees’ for purposes of determining whether a mortgage is a ‘high-cost mortgage,’” according to a summary of the bill.
“These common-sense changes will help low- and moderate-income families as well as first-time homebuyers access affordable mortgage credit and experience the benefits of one-stop shopping by ensuring that safe, properly underwritten mortgages pass the qualified mortgage test,” said Rep. Huizenga during remarks on the House floor prior to the bill’s passage on a 280-131 vote.
Original cosponsors of H.R. 1153 included U.S. Reps. David Scott (D-GA), Steve Stivers (R-OH), Gregory Meeks (D-NY), and Dave Joyce (R-OH). U.S. Rep. Sean Duffy (R-WI) also signed on as a cosponsor.
Huizenga, who serves on the House Financial Services Committee and chairs the panel’s Capital Markets, Securities, and Investment Subcommittee, said the Consumer Financial Protection Bureau in 2014 set qualified mortgage (QM) ability-to-repay requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act and stipulated that points and fees may not exceed 3 percent of the loan amount.
A QM “represents the safest, best underwriting mortgage on the market — it’s the gold standard,” said Huizenga, who began his career as a realtor and represents the third generation of his family to have worked in the housing industry.
But many loans made to low- and middle-income borrowers could not qualify as QM under the current definition because points and fees exceed 3 percent, said Huizenga. Under the current QM definition, points include loan level price adjustments, and fees may include loan officer salary payments, fees to affiliated title companies, and amounts of insurance and taxes held in escrow, among other costs.
Without a QM designation, “it’s unlikely that the loan would be made, and if it were, it would only be available at higher rates due to the heightened liability risks,” Huizenga said. “Consumers would lose the ability to take advantage of the convenience and market efficiencies offered by one-stop shopping.”
The lawmaker stressed that strict federal Consumer Financial Protection Bureau underwriting requirements would be unchanged under his legislation. H.R. 1153 also would not suspend a lender’s legal requirement to determine whether the borrower is able to repay the loan and would not sidestep side regulations for title insurance.
H.R. 1153 now heads to the Senate for its consideration.