On June 9, 2014, the House of Representatives unanimously passed H.R. 3211, the Mortgage Choice Act, which amends the Truth in Lending Act and the definition of “qualified mortgage” under the Dodd-Frank Act. The legislation was introduced by Representatives Bill Huizenga (R-MI) and Gregory Meeks (D-NY), and is intended to afford low and moderate income borrowers access to credit and certain qualified mortgages. The passage of the bill reduces the restrictions on certain points and fees limits so that mortgages which previously would not fit within the definition of a “qualified mortgage” test will now qualify.
Additionally, the Consumer Financial Protection Bureau, in response to financial service industry concerns, recently proposed several adjustments to the mortgage rules issued in 2013. The proposed changes are focused on allowing loans—on a more frequent basis—to be defined as “qualified mortgages”, promoting additional access to credit. Specifically, the proposed changes “would provide an alternative small servicer definition for nonprofit entities that meet certain requirements, amend the existing exemption from the ability-to-repay rule for nonprofit entities that meet certain requirements, and provide a limited cure mechanism for the points and fees limit that applies to qualified mortgages.”
CFPB Director Richard Cordray stated in a press release, “Today’s proposal would maintain those strong protections, while making minor changes to ensure consumers have access to credit. This includes helping nonprofits that provide working families with important pathways to affordable homeownership.”
The proposed changes will allow certain lenders, including certain 501(c)(3) nonprofit organizations, to provide credit to borrowers who are seeking loans at or near points or fees limits. Further, it will allow certain 501(c)(3) nonprofit organizations to write “qualified mortgage” loans, which will assist in providing credit and servicing to underserved populations, including interest-free forgivable loans, while maintaining exemption from servicing rules or loan limits.