On Wednesday, the House passed the Portfolio Lending and Mortgage Access act - introduced by Rep. Andy Barr (R-KY) - that seeks to roll back some of the mortgage regulations put in place after the financial crisis of 2008.
The bill passed on a bipartisan vote of 255 to 174.
Opponents of the bill - including some consumer groups - claim it will open the door to the type of reckless home lending practices that precipitated the disastrous financial crisis of 2008.
The Consumer Financial Protection Bureau regulations, which were created as part of the federal government’s response to the 2008 crisis, currently provide an exemption for small and rural banks from certain mortgage standards the agency created to prevent bad lending practices, while at the same time still providing these small banks a “safe harbor” protection from federal penalties and lawsuits brought by borrowers who have defaulted on their loans.
The bill passed by the House seeks to extend that safe harbor rule to all banking institutions and eliminate some of the regulations that supporters of the bill say have caused community banks to curtail - or eliminate all together - their mortgage lending.
To be considered a “qualified mortgage” under CFPB’s rules, the borrower must have a debt to income ratio of less than 43%, the loan’s points and fees cannot exceed 3%, and the loan must not contain provisions like negative amortization, interest-only payments, or balloon payments and the max term of the loan must be 30 years or less.
The president has signaled that he is likely to veto the bill if it reaches his desk.