Two major mortgage bills move forward in Congress

Written By: Joel Palmer, Op-Ed Writer

More than a year into the Trump presidency, a rollback of Obama era mortgage lending regulations is gaining momentum.

With encouragement from the mortgage and financial services industries, many in Congress are hoping to reduce the impact of regulations meant to combat conditions that lead to the 2008 financial crisis.

Proponents of these efforts believe that, while some regulations were necessary, lawmakers and President Obama became overzealous in their attempts to curtail overly aggressive lending practices. They hope to create more balance between protecting consumers without punishing lenders. 

Opponents on the other hand claim that recent legislation will erode consumer protections put in place by Dodd-Frank.

A busy March for mortgage related legislation began with U.S. Senate debate on the Economic Growth, Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155). The bill won bipartisan support from the Senate Banking Committee in December.

S. 2155 raises the threshold for Dodd-Frank regulatory standards from $50 billion in assets to $250 billion in assets.

The Credit Union National Association (CUNA) is strongly encouraging member institutions to support S. 2155 through its “Campaign for Common-Sense Regulation.” 

“Protecting home buyers from the greedy Wall Street bankers who fleeced millions and wrecked the economy is good public policy. But Washington imposed new mortgage rules on all lenders…”

CUNA claims that one of four credit union employees spends “significant time” on paperwork related to these regulations.

Part of the reason the bill has garnered support from nine Senate Democrats is that it is much less aggressive than a House bill that aimed to completely overhaul Dodd-Frank. A key part of the House bill from last June was to strip the authority of the Consumer Financial Protection Bureau.

Still, there are concerns about S. 2155, namely that it would exempt 25 of the 38 largest banks in the U.S. from Dodd-Frank regulatory standards. 

The Center for American Progress warns that those 25 large banks, which took $47 billion in Trouble Asset Relief Program bailout funds, “would no longer be subject to stronger capital and liquidity rules, enhanced risk management standards, living-will requirements, some stress testing requirements, and more. These rules are vital tools to protect the safety and soundness of banks and the stability of the financial sector.”

Other concerns with the legislation include:

•    Exempting all banks with less than $10 billion in assets from the Volcker Rule.

•    Exempting 85 percent of lenders from new HMDA reporting requirements required by Dodd-Frank.

•    Permitting manufactured-home companies to steer borrowers to their preferred, affiliated lenders.

The Congressional Budget Office (CBO) estimates the bill would increase federal deficits by $671 million over 10 years, due to an increase in spending of $233 million and a decrease in revenue of $439 million.

Another legislative development that could impact mortgage processors and underwriters was House passage of The Portfolio Lending and Mortgage Access Act. This bill was introduced for a second time nearly a year ago by Rep. Andy Barr of Kentucky.

According to a release from Barr, the legislation would extend the 'Qualified Mortgage' legal safe harbor to small creditors, banks and credit unions, with total consolidated assets of $10 billion or less who originate and hold residential mortgage loans in portfolio, rather than selling or securitizing them, allowing those lenders to satisfy Dodd Frank's ability-to-repay rule.

“This legislation is a common-sense approach that will help borrowers gain access to some of the lowest risk mortgage products offered by banks,” said James Ballentine, executive vice president of congressional relations and political affairs for the American Bankers Association last year when the bill was reintroduced.

“Loans held in portfolio are well underwritten and conservative by their very nature.  There is no need to create additional barriers for creditworthy borrowers for loans held in a bank’s portfolio.”

About the Author

As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.

Opinion-Editorial (Op-Ed) Disclaimer For NAMP® Library Articles: The views and opinions expressed in the NAMP® Library articles are those of the authors and do not necessarily reflect any official NAMP® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMP®. Nothing contained in this article should be considered legal advice.