Debra W. Still, CMB, Chairman of the Mortgage Bankers Association (MBA), applauded HR 1077, the Consumer Mortgage Choice Act, introduced earlier in March in the U.S. House of Representatives by Rep. Bill Huizenga (R-MI). The bipartisan bill would modify the definition of points and fees in the Dodd-Frank Act’s Ability to Repay/Qualified Mortgage provisions to improve access to affordable mortgage credit for qualified borrowers.
Under the Dodd-Frank Act, loans that have points and fees in excess of three percent of the loan amount cannot qualify for the Qualified Mortgage definition that allows lenders to meet the ability to repay test. Non-QM loans carry with them greater liability for lenders, and thus will be more expensive or less available for borrowers.
“Determining a borrower’s ‘ability to repay’ is a critical part of underwriting a safe and sustainable mortgage, and MBA has worked closely with policymakers to craft a QM rule that works best for borrowers and lenders alike,” said Still. “In our review of the final rule, we have identified several concerns with the points and fees calculation that have the potential to limit the choices that borrowers have when selecting a mortgage and increasing the costs of getting those mortgages. This bill goes a long way toward addressing those concerns.”
HR 1077 would increase choices and lower costs for borrowers by making the following modifications to the points and fees calculation used to determine whether a loan meets the Qualified Mortgage definition:
► Excluding fees paid to lender-affiliated title entities (fees paid to unaffiliated entities are already excluded);
► Preventing double counting of loan officer compensation;
► Clarifying that amounts held in escrow accounts for payment of homeowners insurance, which are not retained by the lender or its affiliates, should not be included in the calculation;
► Excluding lender charges necessary to cover Loan Level Price Adjustments (LLPAs) charged by Fannie Mae and Freddie Mac; and
► Excluding lender-paid compensation to a correspondent bank or mortgage brokerage in a wholesale transaction.