H.R. 3971, the Community Institution Mortgage Relief Act of 2017
Floor Situation
On Tuedsay, December 12, 2017, the House will consider H.R. 3971, the Community Institution Mortgage Relief Act of 2017, under a structured rule. The bill was introduced on October 5, 2017 by Rep. Claudia Tenney (R-NY) and was referred to the Committee on Financial Services which ordered the bill to be reported by a vote of 41-19 on October 12, 2017.
Summary
H.R. 3971 directs the Consumer Financial Protection Bureau (CFPB) to exempt from certain escrow or impound requirements a loan secured by a first lien on a consumer’s principal dwelling if the loan is held by a creditor with assets of $25 billion or less. The bill also requires the CFPB to provide either exemptions to, or adjustments from, the mortgage loan servicing and escrow account administration requirement of the Real Estate Settlement Procedures Act of 1974 for servicers of 30,000 or fewer mortgage loans.
Background
In January 2013, the CFPB issued a final rule implementing Section 1461 of the Dodd-Frank Act, which relates to requirements for creditors to establish an escrow account for higher-priced mortgages secured by a first lien on a principal dwelling. Escrow requirements mandate borrowers to set aside funds to pay property taxes, homeowners insurance premiums, and other mortgage-related insurance requirements. The 2013 CFPB rule expanded the required timeframe for a mandatory escrow account, from one to five years. The rule provides exemptions from these requirement to creditors that operate primarily in rural or underserved counties, and made 500 or fewer first-lien mortgages in the preceding calendar year, among other requirements.
In January 2013, the CFPB also issued final rules implementing Section 1463 of the Dodd-Frank Act, related to mortgage servicing. Mortgages servicing involves, among other things, collecting an processing mortgage payments, collecting insurance and tax payments, and addressing problems such as late payments, delinquencies, and defaults. The 2013 CFPB rules, which were amended in 2016, prohibit certain acts and practices by servicers of federally related mortgage loans, including, for example, a prohibition on obtaining force-placed hazard insurance, unless certain conditions are met; charging fees for responding to valid qualified written requests; failing to take timely action to respond to a borrower’s requests; failing to respond within 10 business days to a request from a borrower to provide information about the owner or assignee of a loan..
The Dodd-Frank Act and CFPB’s expansion of escrow and mortgage servicing requirements are overly burdensome for community financial institutions and are causing these institutions to exit the mortgage market. These requirements present a problem of scale for community financial institutions, which do not have the internal human or financial resources to abide by additional servicing requirement or create and maintain escrow accounts in-house. The burdensome and expensive regulations promulgated by the CFPB force small lenders to make difficult choices: pass the increased costs to consumers as part of the mortgage process, or exit the mortgage market altogether. Neither of these options benefits nor protects consumers.
This legislation provides regulatory relief for community financial institutions by exempting lenders from certain escrow and impound requirements if they have consolidated assets of $25 billion or less, and hold the mortgage on their balance sheet for three years. H.R 3971 also exempts mortgage servicers from certain requirements related to mortgage loan servicing and escrow account administration if they service 30,000 or fewer mortgage loans annually.
Amendments
- Rep. Brad Shermon (D-CA) – This amendment lowers the amount of consolidated assets of a creditor eligible for the safe harbor from escrow requirements in the bill from $25,000,000,000 or less to $10,000,000,000 or less; Lowers the number of loans that a mortgage servicer eligible for exemptions and adjustments from the Bureau can service annually from 30,000 or fewer mortgage loans to 20,000 or fewer mortgage loans.
Cost
The Congressional Budget Office (CBO) estimate is unavailable for this legislation.
Staff Contact
For questions about amendments or further information on the bill, contact Dominique Yantko with the House Republican Policy Committee by email or at 3-1555.