MBA Applauds Bill to Clarify QM Points and Fees

By: Jann Swanson •

Representative Bill Huizenga, (R-MI) has introduced HR 1077, a bill To amend the Truth in Lending Act to improve upon the definitions provided for points and fees in connection with a mortgage transaction.  The bill, which has seven bi-partisan sponsors, has been referred to the House Committee on Financial Services.  As yet neither the text of the bill nor a summary is available in the Library of Congress/Thomas database but the Mortgage Bankers Association (MBA) has released a statement commending the legislation. 

According to the MBA statement the bill would "modify the definition of points and fees in the Dodd-Frank Act's Ability to Repay/Qualified Mortgage provisions to improve access to affordable mortgage credit for qualified borrowers."

Debra W. Still, Chairman MBA said that under the current Dodd-Frank rules, loans that have points and fees of more than three percent of the loan amount cannot qualify as Qualified Mortgages (QM), a definition that allows lenders to meet the ability to repay test.  Loans that are not QM carry greater liability for lenders and will thus be more expensive or less available for borrowers, she said.      

"Determining a borrower's 'ability to repay' is a critical part of underwriting a safe and sustainable mortgage, and MBA has worked closely with policymakers to craft a QM rule that works best for borrowers and lenders alike," said Still.  "In our review of the final rule, we have identified several concerns with the points and fees calculation that have the potential to limit the choices that borrowers have when selecting a mortgage and increasing the costs of getting those mortgages.  This bill goes a long way toward addressing those concerns."   

She said that H.R. 1077 would increase choices and lower costs for borrowers by modifying the points and fees calculation to for a Qualified Mortgage definition.  It would:

  • Add fees paid to lender-affiliated title entities to the current exclusion for fees to unaffiliated entities;
  • Prevent double counting of loan officer compensation;
  • Clarify that amounts held in insurance escrow accounts should not be included in the calculation;
  • Excludes lender charges necessary to cover Loan Level Price Adjustments (LLPAs) charged by Fannie Mae and Freddie Mac; and
  • Excludes lender-paid compensation to a correspondent bank or mortgage brokerage in a wholesale transaction.