RE: Tom Graves Votes To Expand Access To Mortgages, Home Ownership
Honestly, it doesn’t surprise that U.S. Rep. Tom Graves, R-Georgia., would support the Preserving Access to Manufactured Housing Act (H.R. 650) and the Mortgage Choice Act (H.R. 685) bills.
What surprises me he is that he has the audacity to boast about the legislation, noting that it expands access to mortgages and home ownership. It doesn’t. It only benefits the mortgage industry by getting rid of caps on how much they can charge. It doesn't benefit you and me.
The mortgage industry is critical to the United States economy. It’s how most Americans pay for their homes. I’m firm believer of any type of legislation concerning the mortgage industry should be heavily watched.
In 2010, former Federal Reserve Chairman Ben Bernake gave a testimony regarding the causes of the most recent recession. He said that although a variety of different factors helped trigger the financial and economic crisis, “the most prominent one was the prospect of significant losses on residential mortgage loans to subprime borrowers that became apparent shortly after house prices began to decline.”
H.R. 685, the Mortgage Choice Act, amends the Truth in Lending Act and removes disincentives that discourage lenders from upselling consumers on title insurance policies offered through affiliated companies.
Specifically, the bill excludes the cost of title insurance from points and fees on mortgages. It would also establish that funds held in escrow for property insurance payments aren’t considered points and fees.
Currently, under the Qualified Mortgage rule, which are guidelines that lenders follow to ensure consumers can afford their mortgages, cannot have points and fees (up-front costs) more than 3 percent of the loan amount. These fees include charges by affiliated settlement service providers.
The bill, which passed Congress Tuesday 286-140, creates a new loophole that could allow lenders to charge excessive fees to borrowers because there would be no cap on how much lenders can charge you on title insurance policies.
Many mortgage-related associations and Graves claim H.R. 685 will clarify the definition of “points and fees” in the Truth in Lending Act, allowing more loans to be classified as Qualified Mortgages, which would increase borrower options.
House Speaker John Boehner, R-Ohio, said “Affordable housing is vital for low and middle income families and workers, but far too often, Washington’s regulatory overreach and red tape gets in the way of their American dream. By increasing access and promoting choice for consumers, this legislation will help more hardworking Americans get ahead and achieve financial independence.”
I’m not sure how this bill would expand credit for low- to moderate-income borrowers? What do title agencies and how much a mortgage originators get paid have anything to do with this? I’d be interested in knowing more besides just a blanket statement from every politician that says it will.
H.R. 650 is another mortgage-related bill that passed the house, 263-162, Tuesday. The legislation would change Home Ownership and Equity Protection Act triggers and make a technical change on who is considered a loan officer.
According to the Congressional Budget Office, the bill would amend the Truth in Lending Act by adjusting the definitions of a mortgage originator and a “high-cost mortgage.” Under current law, employees of retailers of manufactured homes who do not accept residential mortgage loan applications, offer or negotiate terms of loans, or advise consumers on loan terms are excluded from the definition of mortgage originator.
H.R. 650 is somewhat of a good thing as it would exclude retailers of manufactured homes as well as their employees from acting as a mortgage originator, as long as they do not receive more compensation for selling a home with a mortgage than they would for selling the same home for cash.
H.R. 650 gets rid of the annual percentage rate cap and leaves borrowers vulnerable because HOEPA protections would not kick in for manufactured housing loans in the current lending environment unless interest rates were around 14 percent. In contrast, the going-rate for a traditional real estate mortgage loan is around 4 percent, according to Adam Levitin, a professor of law at the Georgetown University.
“HR 650 would not expand access to sustainable credit; it would instead encourage predatory lending,” Levitin said. “A manufactured home borrower could pay almost $3,500 in documentation and other junk fees on a $75,000 loan. Again, this is a license for abusive lending practices.”
Is the financial industry heavily regulated? Definitely. Just take a look at this diagram that shows all of the new regulations passed since the 2010 Dodd Frank Wall Street Reform Act.
Are H.R. 685 and H.R. 650 the solution to the limited credit availability? No. They can do better. We deserve better because the path we’re headed on now is one that leads straight to the fiery gates of another recession.
Rachel Norvell