On Wednesday, May 7, the House Financial Services Committee approved H.R. 3211, the Mortgage Choice Act. The legislation was introduced by Congressman Bill Huizinga (R-MI) and makes changes to the Truth in Lending Act definition of points and fees under the Ability to Repay/Qualified Mortgage rule. Under current law, a “fee” or “point” varies greatly depending upon who is making the loan and what arrangements are made by consumers to obtain closing services. If the consumer chooses a title insurance provider that is affiliated with the lender, the title insurance charges count, but if the insurance is purchased from an unaffiliated title agency, the title charges do not count. As a result, many mortgage lenders affiliated with other settlement service providers must make difficult choices in determining how they will originate loans so as to meet the qualified mortgage (QM) requirements.  

The goal of the Mortgage Choice Act is promote access to affordable mortgage credit without overturning consumer protections and sound underwriting. In order to accomplish these goals, the legislation would:

  • Clarify that amounts paid into escrow for future payments of taxes and hazard insurance are excludable from the definition of “points and fees,” making the provision consistent with the exclusion of tax and insurance escrows for purposes of calculating finance charges under TILA Sec. 106.
  • Permit the exclusion of charges for title insurance regardless of the title company’s affiliation with a creditor or mortgage originator, provided: (i) the charge is reasonable; and (ii) in the case of an affiliated title company, that it and its affiliates are operating in compliance with RESPA’s conditions for affiliated business arrangements. 

The legislation is supported by a number of Democrats and Republicans on the House Financial Services Committee and is expected to move quickly to the full House, where it is likely to be considered and approved under suspension of the rules. Measures considered under suspension of the rules are typically considered non-controversial, cannot be amended and require two-thirds majority of the members present to vote in favor for passage. Identical companion legislation has been introduced in the Senate by Senator Joe Manchin (D-WV) and both House and Senate staff have indicated to us that they are working together to win Senate approval.