In a bid to ensure that the American dream of owning a home becomes a reality for as many creditworthy consumers as possible, the House of Representatives recently passed the Mortgage Choice Act of 2015. It was introduced by Rep. Bill Huizinga (R-MI) and received overwhelming bipartisan support in the House with 286-140 votes.
This is welcome news for real estate agents and brokers as well as a number of industry groups that are in support of the act.
Although Qualified Mortgage (QM) rules haven been modified over the past year to make it easier for qualified borrowers to apply for a mortgage, unfair regulatory burdens have prevented many hard-working Americans, primarily low-moderate income families, from obtaining affordable home mortgages. The restrictions that were put in place were meant to protect borrowers from risky lending practices, but in reality prevented them from obtaining a mortgage.
As a result, the U.S. home ownership rate continues to decline because the largest group of potential homeowners has been locked out of the real estate market. The Mortgage Choice Act of 2015 lifts these regulatory burdens enabling more American consumers to participate in the real estate market recovery and achieve financial independence. “A qualified mortgage is the gold standard of home loans. Hardworking families should not be denied access to a qualified mortgage because of technicalities that are largely out of their control. The Mortgage Choice Act enacts commonsense reforms to Dodd Frank making it possible for low and middle income families to achieve a portion of the American Dream,” noted Huizinga.
But the real crux of the act is the change that it makes to the Truth in Lending Act (15 U.S.C 1601). When this change becomes law it will exclude insurance held in escrow and, under certain circumstances, fees paid to companies affiliated with the creditor from the costs that are considered when calculating the “points and fees” for determining a “Qualified Mortgage” (QM). It is the way these fees were calculated that priced consumers out of a qualified mortgage. This change is expected to level the playing field for affiliated title service providers ensuring more affordable mortgages for all consumers whether they purchase or refinance a home.
Chris Polychron, president of the National Association of Realtors® agrees that the act improves consumer access to mortgage credit with the full protection of the Ability-to-Repay and Qualified Mortgage rules that went into effect last year to safeguard borrowers from risky lending practices.
The bill must now be approved by the Senate, where it is expected to garner similar support, before it can be signed into law by President Barack Obama.