House approves bill to change mortgage rules

Washington – — House lawmakers approved legislation by Rep. Bill Huizenga, R-Zeeland, late Tuesday that would adjust the regulatory definition of a “qualified mortgage” to exclude certain title insurance-related points and fees, even when the lender or its affiliates receives the fees.

Huizenga said the bill, which passed by a 286-140 vote with the support of 45 Democrats in the GOP-controlled House, would improve lower-income consumers’ access to credit.

“A qualified mortgage is the gold standard of home loans,” Huizenga said. “Hard-working families should not be denied access to a qualified mortgage because of technicalities that are largely out of their control.”

Rep. Maxine Waters, D-California, spoke against the measure, saying it would roll back protections for homebuyers and undermine recent reforms. The Mortgage Choice Act “would affect choice but in the wrong way” and “ironically ensure fewer choices for consumers,” Waters said.

To be considered a “qualified mortgage,” giving lenders legal protections, the points and fees on a home loan generally may not exceed 3 percent of the total loan amount, among other restrictions.

Huizenga’s bill would exclude from the points and fees calculation those fees paid to title insurance companies affiliated with the lender, and any escrow for future payment of insurance. Lenders have complained that including affiliated title fees in the 3-percent cap limited relatively safe loans from the “qualified mortgage” umbrella.

President Barack Obama’s administration is concerned that the revision would allow lenders to increase the cost of loans, while the lender remains eligible for “qualified mortgage” umbrella liability protections.

In a policy statement this week, the White House said Obama would veto the bill if it reaches his desk because it “risks eroding consumer protections and returning the mortgage market to the days of careless lending focused on short-term profits.”

Rep. Dave Trott, a Republican Birmingham lawyer whose former businesses included a title insurance company, defended the bill on the House floor.

“The problems are the largely the result of an overreach by the federal government and poorly thought-out rules that were, in many cases, written by people who may or may not know the difference between a mortgagee and mortgagor,” Trott said.

A companion bill has not been introduced in the Senate this session. Bill supporters noted Waters supported the measure last August when she signed a letter urging Senate Majority Leader Harry Reed, D-Nevada, to consider taking up the issue in that chamber.

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