Compliance Blog

Written by Michael Coleman, Regulatory Compliance Counsel

Last week we blogged about the CFPB’s Small entity compliance Guide for the Ability to Repay/Qualified Mortgage final rule, as well as some NAFCU resources on the CFPB’s final mortgage rules, specifically about the points and fees caps contained in the qualified mortgage final rule.

Today we’d like take a look at H.R. 1077, the Consumer Mortgage Choice Act, introduced by Representative Bill Huizenga on March 12, 2013. If you have ever talked with me on the phone (particularly about some kind of a violation/non-compliance with a regulation), you might have heard me utter one of my favorite sayings: “you can’t unscramble those eggs.” Well, we mere-mortal compliance officers might not be able to unscramble those eggs, but Congress sure can.

The final rule on ability to repay and qualified mortgages section 1026.43(e)(3) contains restrictions on points and fees for qualified mortgages. H.R. 1077 would amend the Truth in Lending Act (TILA) definition of “points and fees.”

On May 3rd, Dan Berger, NAFCU’s Executive Vice President of Government Affairs, sent a letter on H.R. 1077 to Rep. Jeb Hensarling, the Chairman of the House Financial Services Committee, and Rep. Maxine Waters, the ranking member of the House Financial Services Committee, here’s an excerpt:

“As currently defined, “points and fees” include, among other charges, fees paid to affiliated title companies, salaries paid to loan originators, amounts of insurance and taxes held in escrow, loan level price adjustments, and payments by lenders to correspondent banks, credit unions and mortgage brokers in wholesale transactions.  As a result of this troublesome definition, many affiliated loans, particularly those made to low- and moderate-income borrowers, would not qualify as Qualified Mortgages (QMs) and would be unlikely to be made or would only be available at higher rates due to heightened liability risks.  Consumers would lose the ability to choose to take advantage of the convenience and market efficiencies offered by one-stop shopping.

The Consumer Mortgage Choice Act would make important changes that would:

- Exclude title charges from “points and fees” definition. 

- Prevent double-counting of loan officer compensation.  

- Clarify that escrow charges should be excluded from any calculation of “points and fees.”

- Exclude loan level pricing adjustments (LLPAs).     

- Exclude lender-paid compensation to mortgage brokers. 

 Taken together, these changes would make important improvements to the definition of “points and fees” used to determine whether a loan meets the QM test.” 

 Contact your members of Congress. My colleague Katie Marisic – NAFCU’s Director of Political Affairs- wrote a great guest blog a while back about the importance of reaching out to your members of Congress on important issues that affect credit unions.  As Katie pointed out, legislative advocacy is an important means by which credit unions (and their members) can help stem the tide of regulatory burden. And every now and then, a bill is introduced that will do just that – help credit unions by directly reducing regulatory burden. Or as I like to say: “unscrambling those eggs.” Check out NAFCU's Legislative Resource Center, it has links to help you find your Representative, as well as other great resources such as NAFCU’s Grassroots Action Network. 

I don’t know about you, but I would much rather be spending my free time watching the Capitals playoffs than worrying about the points and fees calculations for qualified mortgages.