Should Small Mortgage Lenders Be Exempt From Holding Borrowers Funds in Escrow Accounts? (H.R. 1529)
Do you support or oppose this bill?
What is H.R. 1529?
(Updated August 1, 2017)
This bill would amend the Truth in Lending Act to exempt lenders from a requirement to hold escrow funds related to a mortgage if the lender has assets of $10 billion or less. Lenders would also be exempt if they retain the mortgage on their balance sheet for three years after origination.
Current law does not provide an exempt small mortgage lenders from setting up escrow accounts for property tax payments and insurance premiums. This is a common practice in the process of obtaining a mortgage and buying a home.
A lender would be considered in compliance with the three-year balance sheet requirement if it transfers a loan because the mortgage is purchased by another lender, if a state or federal regulator provides a recommendation, or if the lender goes bankrupt.
The Bureau of Consumer Financial Protection (CFPB) would be directed to exempt mortgage servicers from certain requirements related to — among other things — administering escrow accounts if they service 20,000 or fewer mortgage loans annually.
Argument in favor
These changes will make the mortgage process more straight forward for smaller lenders by eliminating an onerous requirement that disadvantages them in the mortgage market.
Argument opposed
Small mortgage lenders shouldn’t be exempt from such an essential element of the mortgage process, and borrowers might avoid paying their property taxes or homeowner’s insurance.
Impact
Mortgage borrowers, small mortgage lenders that comply with this legislation’s requirements, and the CFPB.
Cost of H.R. 1529
The CBO estimates that implementing this legislation would increase spending by less than $500,000.
Additional Info
In-Depth: After the House Financial
Services Committee’s markup of this legislation, the committee’s
Chairman Jeb Hensarling (R-TX) praised the bipartisan support for the
bill, adding that:
“It is not an exaggeration to say that community banks and credit unions are withering on the vine. We are losing, on average, more than one a day and they are not perishing of natural causes. The sheer weight, volume, cost, complexity and uncertainty of federal regulation is a burden that is killing them off. And as they die, unfortunately, so do the dreams of millions of our fellow citizens who rely upon these community financial institutions to achieve their American dream of financial independence.”
Ryan Donovan, the Chief Advocacy Officer of the Credit Union National Association, said the bill and its counterparts passed at markup “would all help what we have dubbed the crisis of creeping complexity.”
Expressing opposition to this legislation, Americans for Financial Reform pointed to a regulatory action by the CFPB that sought to ease the plight of community banks, and said this bill “goes far beyond that expansion and authorizes unsustainable lending.”
The House Financial Services Committee passed this bill by a vote of 48 to 10. During the 113th Congress, this legislation’s predecessor was also passed by the committee, by a 43 to 16 margin.
Media:
- House Financial Services Committee Press Release
- CBO Cost Estimate
- Housingwire
-
Credit Union Times
- Americans for Financial Reform (Opposed)
- Independent Bankers Association of Texas (In Favor)
Summary by Eric Revell
(Photo Credit: Flickr user dave_mcmt)
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