WE’RE HEARING the fight over the qualified mortgage rule will now move to Congress. The Consumer Financial Protection Bureau issued its final, final QM rule Wednesday (May 29) and it left too many sore points uncorrected for industry groups to leave the field.
The National Association of Realtors, Mortgage Bankers Association and others are supporting a bill (H.R 1077) that would eliminate some of the charges that the CFPB has included in the 3% cap on points and fees.
Reps. Bill Huizenga, R-Mich., and David Scott, D-Ga., introduced a bill (HR 1077) to fix for the QM rule back in March. But the Consumer Mortgage Choice Act is still relevant today.
So far there are 36 co-sponsors—mostly members of the House Financial Services Committee. No hearings have been scheduled yet. But industry lobbyists are expected to double their efforts to get H.R. 1077 on the committee schedule when Congress returns from its Memorial Day break.
The bill targets loan-level price adjustment fees that Fannie Mae and Freddie Mac charge as a risk premium. Almost no one in the industry understands why LLPA fees are included in the QM cap. Those fees are not retained by the lender. They go to Fannie and Freddie.
H.R. 1077 also removes charges by title companies that are affiliated with a lender from the 3% cap. Industry groups claim that title company fees are regulated by the states. If the consumer groups feel the fees are too high, they should hound the state regulators.
At a recently committee hearing, Rep. Mel Watt, D-N.C, raised questions about the need to include affiliated title fees in points and fees. President Obama recently nominated Watt to be the new GSE regulator.
Other real estate-related fees charged by lender-affiliated companies are counted toward the 3% cap. But supporters of the H.R. 1077 believe they have a solid case for removing title fees from the QM cap, despite opposition from consumer groups.
When the QM rule goes in effect in January, most lenders are going to make only QM loans to be on the safe side. Exceeding the 3% cap means the loan is no longer considered a QM loan and no longer shielded from litigation when a borrower defaults.
When Huizenga and Scott introduced H.R. 1077, the bill included a provision that would prevent double-counting of loan officer compensation.
The CFPB had proposed to include any compensation a LO receives from their employer in a loan transaction toward the 3% cap. But the consumer bureau eliminated that provision in issuing the May 29 final rule.
However, the bureau stuck with a provision that puts the wholesale/broker channel at a distinct competitive disadvantage to the retail channel.
This provision says compensation paid by a wholesale lender to mortgage brokerage firm must be added to the points and fees. The MBA claims this unfairly penalizes the wholesale channel for no good reason. It will keep MBA members and the mortgage brokers pushing for relief.
But consumer groups led by the Center for Responsible Lending claim the CFPB got it right.
“Importantly, the rules implement the Dodd-Frank Act requirement that payments from lenders to brokers—so-called yield-spread premiums—be included when calculating whether a mortgage falls above or below the points-and-fees limit that defines a qualified mortgage. Including yield-spread premiums will help prevent a lending abuse that fueled the financial crisis, when brokers were paid big fees to steer borrowers into loans with higher interest rates than what borrowers qualified for,” CRL said in a statement.
So it is going to a tough fight to get a QM corrections bill through Congress. Consumer groups are ready to defend the CFPB rule. And many Democrats in the Senate will be wary of advancing any bill that could be used to weaken the CFPB.
A similar version of H.R. 1077 has been introduced in the Senate by Joe Manchin, D-W.Va., and Mike Johanns, R-Neb.
OH THOSE VINERS: Once in a while we get tired of the endlessly clever political postings on www.mortgagegrapevine.com (the wing nuts vs. the libtards) and get a hankering to read something useful for the mortgage business. Here’s a thoughtful thread, on what to put on the back of a business card. We travel quite a bit and collect a lot of business cards (and have always tried to see how we could corner the secondary market for card exchanges at even a penny apiece!) and one tip we have for how to differentiate all the cards is to write something on the back of the card. It doesn’t have to be words even. Any mark you put on the back will give your brain something to work with as it tries to differentiate this particular card from all the guys (or gals) in business suits that you met at the show.
MOST READ/MOST EMAILED: This week, these two categories have one and the same winner, Brian’s May 29 story on the new CFPB ruling as it applies to loan officer compensation. Everybody wants to know how he and she is going to be paid, right? This one originally was a Federal Reserve idea but the Fed obligingly gave it up to the fledgling CFPB, in the process giving lenders a few more months to be compliant.
BESTBLOG: This week it is Ted Cornwell’s blog “Old Mortgage Joke Gets Stale.” Who doesn’t like jokes? Here’s the one in question: Lenders saying they lose money on every origination, but make it up in volume. OK, Jay Leno has nothing to fear. But, on the other hand, can Jay take a 1003? Probably not.
LET ME CALL YOU TWEETHEART: If you haven’t already, please do come and follow us at www.twitter.com/natmortgagenews. We have 14,750 followers now, and Lady Gaga is beginning to feel us coming up from behind. We’ve posted over 5,000 tweets, and all of them about mortgages. What kinds of things do we tweet? Links to interesting stories on our websites, photos of the front pages of our print publications, retweets from others in the mortgage tweetosphere. Often our tweets are our quickest way of delivering the news, so keep an eye out!
Mark Fogarty is editorial director of the SourceMedia Mortgage Group and has been commenting on the mortgage market since 1984. Brian Collins is the group’s senior editor and D.C. bureau chief. He has worked the mortgage beat since 1988.