U.S. House votes to roll back mortgage rules
BUSINESS RECORD STAFF Nov 19, 2015 | 4:16 pm
1 min read time
258 wordsAll Latest News, Banking and Finance, Government Policy and LawThe U.S. House of Representatives passed legislation Wednesday that critics argue rolls back regulations for mortgages that were created to prevent the bad lending practices responsible for the financial crisis of 2008, The Hill reported.
The Portfolio Lending and Mortgage Access Act, which was introduced by Rep. Andy Barr (R-Ky.), passed by a 255-174 vote. The bill extends a federal exemption meant for small banks and rural banks to all banking institutions.
The Consumer Financial Protection Bureau issued regulations last year that require lenders to ensure a borrower’s ability to repay a loan in order to obtain a qualified mortgage status, which provides lenders a “safe harbor” protection from federal penalties and lawsuits brought by borrowers who have defaulted on their loans.
However, the bureau created an exemption to allow small banks and rural banks to achieve that qualified mortgage status without following the ability-to-repay rule, which requires a borrower’s debt-to-income ratio to be 43 percent or less. Banking organizations, which support extending the exemption, argued that the rule was too restrictive and caused midsize community banks to decrease or eliminate their mortgage businesses.
Although opponents of the bill say the legislation will open the door to the reckless lending practices of the past, supporters say there is a safety valve in place. Under the legislation, a lender would lose the “safe harbor” protection if the loan is securitized or sold into a secondary market.
The Obama administration has issued a veto threat against the bill, warning it “would undermine the essential protections provided under the Qualified Mortgage rule.”
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