Giving Community Banks Relief From Mortgage Regulations Under Certain Circumstances (H.R. 3971)

What is H.R. 3971?

(Updated January 14, 2019)

This bill would exempt financial institutions from the requirement to establish escrow accounts to pay property taxes and insurance premiums for properties that secure “high-priced mortgages” with interest rates above certain thresholds if the lender has less than $25 billion in consolidated assets and holds the mortgage on its balance sheet for three years. It would also direct the Consumer Financial Protection Bureau (CFPB) to exempt mortgage servicers from requirements to administer escrow accounts if they service 30,000 or fewer mortgage loans each year.

Argument in favor

This bill would ease the regulatory burden on small community financial institutions that offer mortgage loans, helping them better serve their clients officially.

Argument opposed

This bill would ease requirements around risky, high-priced mortgage loans and make much larger banks eligible for this regulatory relief.

Impact

Financial institutions with fewer than $25 billion in consolidated assets and their mortgage borrowers; and the CFPB.

Cost of H.R. 3971

The CBO estimates that enacting this bill would cost less than $500,000.

Additional Info

In-Depth: Sponsoring Rep. Claudia Tenney (R-NY) introduced this bill to reduce the regulatory burden on small financial institutions that offer mortgage loans. The Credit Union National Association wrote the following in support of the bill:

“We believe that the [CFPB] has the authority to make these exemptions under the existing authority which Congress conveyed to keep the regulatory burden on community financial institutions measured while the Bureau addressed its rulemaking on large banks and abusers of consumers. Unfortunately, the Bureau has not exercised this authority to the fullest extent possible, making this legislation necessary in order to ensure these rules are appropriately focused. The two changes made by this proposal would provide important regulatory relief to credit unions and help them to continue efficiently serving their members.”

Some Democrats have expressed their opposition to this bill, with some writing the following in its committee report:

“High-priced mortgage loans are essentially loans with higher interest rates that reflect riskier or subprime borrowers. H.R. 3971 would enable larger servicers, whose incentives are neither aligned with owners of the loans nor the borrowers, to potentially revive some of the abusive practices involved with predatory lending that contributed to the 2007-2009 financial crisis. Relatedly, escrow accounts are an important consumer consumer protection mechanism that ensure that homeowners have funds for recurring homeownership-related expenses, such as property taxes and insurance.”

This legislation passed the House Financial Services Committee on a 41-19 vote and has the support of four bipartisan cosponsors evenly divided between Republicans and Democrats.

Media:

• House Financial Services Committee Press Release
  
• CBO Cost Estimate
  
• Securities Industry & Financial Markets Association
  
• American Bankers Association (In Favor)
  
• Credit Union National Association (In Favor)