The bill, H.R. 2226, seeks to reform the qualified mortgage rule imposed by the Consumer Financial Protection Bureau to allow banks and credit unions to hold mortgages in portfolio, therefore retaining 100 percent of the risk, to satisfy the requirements of the rule.
“By expanding the definition of a ‘qualified mortgage’ to include mortgages that are held on portfolio, this legislation recognizes the fact that when a bank or credit union retains 100 percent of the downside risk of default on a loan, it has a strong incentive to ensure sound underwriting,” Barr said. “This in turn, will expand access to mortgage credit and the American dream of homeownership without producing the risky originate to distribute practices that caused the financial crisis and led to taxpayer bailouts.”
The bill was first passed by the House in 114th Congress by a vote of 255 -174.
Roughly 73 percent of community bankers have decreased their mortgage business or completely stopped providing mortgage loans due to the expense of complying with the qualified mortgage regulation, according to the Independent Community Bankers of America.
The American Bankers Association voiced its support for the bill.
“This important measure, which received bipartisan support in the last Congress, would help many creditworthy borrowers access safe, traditional credit that would otherwise be out of reach,” James Ballentine, ABA’s executive vice president of congressional relations and political affairs, said.
He said regulatory requirements have restrained mortgage lending, and have made it particularly difficult for some creditworthy borrowers to obtain a home loan.
“This legislation is a common-sense approach that will help borrowers gain access to some of the lowest risk mortgage products offered by banks. Loans held in portfolio are well underwritten and conservative by their very nature. There is no need to create additional barriers for creditworthy borrowers for loans held in a bank’s portfolio,” Ballentine said.