• House Passes Bill Modifying Points and Fees Determination for Qualified Mortgages
  • September 25, 2014 | Authors: Peter L. Cockrell; Brett M. Kitt; J. Scott Sheehan
  • Law Firms: Greenberg Traurig, LLP - McLean Office ; Greenberg Traurig, LLP - Washington Office ; Greenberg Traurig, LLP - McLean Office ; Greenberg Traurig, LLP - Houston Office
  • On September 16th, by a margin of 327-97, the U.S. House of Representatives passed a consolidated bill, the “Insurance Capital Standards Clarification Act of 2014” (H.R. 5461), that would make adjustments to various provisions of the Dodd-Frank Act. The vote was taken under a procedure called “suspension of the rules” which is typically used to pass non-controversial bills. Votes under suspension require a two-thirds majority.

    The Committee’s Ranking Democrat, Rep. Maxine Waters (D-CA), voted against the bill. Rep. Waters opposed bringing up the bill on suspension because it “attaches three divisive measures that make substantive changes to the Dodd-Frank Wall Street Reform law to a bipartisan, Senate-passed measure that makes technical changes to the law.”

    Among other things, the H.R. 5461 would adjust the definition of “points and fees” in section 103(bb)(4) of the Truth in Lending Act (15 U.S.C. § 1602(bb)(4)) for purposes of determining whether a residential mortgage loan is a “qualified mortgage.” In order to meet the definition of a “qualified mortgage” and gain the legal protections afforded by that status, points and fees generally may not exceed 3 percent of the loan principal amount. Currently, charges for title examination, title insurance or similar purposes are included in the points and fees calculation unless (i) the charge is reasonable; (ii) the creditor receives no direct or indirect compensation for the charge; and (iii) the charge is paid to a third party unaffiliated with the creditor.

    H.R. 5461 would expand the exclusion for title charges from the points and fees calculation to also exempt reasonable charges that are retained either by the creditor or its affiliate as a result of their participation in an affiliated business arrangement under the Real Estate Settlement Procedures Act (12 U.S.C. § 2602(7)). This exclusion also would apply for purposes of determining status as a high cost mortgage loan.

    These changes previously passed the House on June 9th as a part of the Mortgage Choice Act (H.R. 3211). The bill will now go back to the Senate for consideration.