Bills
| 3.23.22

Changes to Mortgage Reform: Altering Factors That Determine Points and Fees (H.R. 3211)

Do you support or oppose this bill?

What is H.R. 3211?

(Updated March 12, 2015)

Editor's Note: this bill, in prior legislation, was called the Consumer Mortgage Choice Act. It now has a new name: the Mortgage Choice Act.  

This bill alters the Truth in Lending Act to exclude certain factors for determining points and fees for qualified mortgage (QM) eligibility. Since January 1st, 2014, new home loan fees are limited to 3% of the total home loan. This legislation exempts certain loan components from being calculated as part of that 3% ceiling. A list of those components can be found below.  

Argument in favor

Improves access to credit and qualified mortgages for low- and moderate-income borrowers. More people would have access to a qualified mortgage, and this would in turn would be a step toward the revitalization of the U.S. housing market.

Argument opposed

Weakens mortgage reform. Undermines consumer protection. Provides incentives for lenders to steer families into high-risk, high-fee loans they do not understand and cannot afford, effectively recreating one of the catalysts for the 2007-08 financial crisis.

Impact

If enacted, this bill would most significantly impact low- and middle-income borrowers seeking to buy a house via a qualified mortgage. Optimistically, such omissions as those contained in the bill would spur growth in the housing market, which remains stagnant. Pessimistically, a large component of the subprime mortgage crisis that triggered the 2008 financial crisis stemmed from such borrowers not understanding how much it would cost to buy a home, and having to in turn default on their mortgages. There has been concerned raised by both congresspersons and independent analysis groups that this bill is a step in a similar direction.

Cost of H.R. 3211

A CBO cost is currently unavailable.

Additional Info

Of Note: 

The Senate bill is identical. 

In Detail: 


According to Mortgage News Daily, the bill:

  • Excludes from the computation of such points and fees: (1) the amount of any loan level price adjustment payment set by Fannie Mae, Freddie Mac, FHA, or similar government entity, (2) any compensation paid by a mortgage originator to an employee or creditor; and (3) any escrow for future payment of insurance.
  • Modifies the inclusion in the computation of all compensation paid to mortgage brokers and specifies instead all compensation paid directly by a consumer to a mortgage originator, including a mortgage originator that is also the creditor in a table-funded transaction.
  • Modifies the criteria for exclusion from the computation certain reasonable charges elsewhere exempted from the computation even though a creditor receives compensation, but only in so far as the creditor or its affiliate retains the compensation as a result of their participation in an affiliated business arrangement. Requires the charge to be: (1) a bona fide third party charge not retained by the mortgage originator, creditor, or an affiliate; or (2) a fee or premium for title examination, title insurance, or similar purposes.
  • Modifies the conditions under which federal departments and agencies may exempt refinancings under a streamlined refinancing from an income verification requirement that, at the time a refinancing is consummated, the consumer has a reasonable ability to repay the loan and all applicable taxes, insurance, and assessments. Repeals the exception for bona fide third party charges not retained by the mortgage originator, creditor, or an affiliate from the requirement that total points and fees not exceed 3% of the total new loan amount. (Thus subjects such charges to the same 3% ceiling.)

--This bill was one of more than a dozen bills to come out of a May 7th House Financial Services Committee Markup. The other bills are: 



(Photo Credit: Phillip Taylor)