CUNA and other trade organizations wrote to House leadership Monday urging them to support the Mortgage Choice Act (H.R. 1153), which is scheduled for House consideration this week. The bill would exclude affiliated title insurance charges and escrowed homeowners’ insurance premiums from the points and fees calculation.
“H.R. 1153 endeavors to restore a full and open competitive market by clarifying the definition of fees and points,” the letter reads. “In doing so, the legislation will ensure consumers more choices in credit providers and settlement service options.”
The Consumer Financial Protection Bureau’s qualified mortgage (QM) rule states that points and fees may not exceed 3% of the loan amount. Under current laws and rules, what is considered a “fee” or a “point” toward the points and fees cap varies depending on who is making the loan and what arrangement borrowers have made to obtain title insurance.
If the title insurance provider chosen has an affiliation with the lender, title insurance charges count, if they are not, the charges do not. In addition, escrowed homeowners premiums can count as points and fees due to ambiguities in the law.
“The inclusion of either title insurance or escrowed homeowners’ premiums has caused many loans, especially those for low- and moderate-income consumers, to fail the QM test in situations where the consumer elected to use one stop-shopping,” the letter reads. “As a result, many otherwise qualified borrowers could not avail themselves of in house services and/or may have received a higher interest rate.”
H.R. 1153 passed the House Financial Services Committee in November with a 46-13 vote, and an identical version of the bill was passed 286-140 by the House in 2015. The bill’s language was also included in the House-passed Financial CHOICE Act.