By:      Michael Meehan

On June 9, 2014, the United States House of Representatives passed the Mortgage Choice Act of 2014, which, among other things, revises the definition of “points and fees” under the Truth in Lending Act’s qualified mortgage rule to exempt both affiliated and unaffiliated title fees.

Under the Dodd-Frank Act, a qualified mortgage may not have points and fees that exceed three percent (3%) of the loan amount. “Points and fees” is a defined term in the statute, which currently encompasses fees paid to affiliated title companies (those companies with which the lender has an affiliated business arrangement) but not unaffiliated title companies. According to the Act’s proponents, Representatives Bill Huizenga (R-Mich) and Gregory Meeks (D-NY), the current definition precludes many affiliated loans from meeting the qualified mortgage rule’s points and fees threshold, further restricting consumer access to mortgage credit, or at a minimum, increasing the cost of such credit. The Act amends the definition under the rule to also exclude affiliated title fees, which its proponents believe will result in a greater number of qualified mortgage loans and expanded credit opportunities for low and moderate income homebuyers.

The Act has been widely supported by financial services and housing trades, including the Mortgage Bankers Association, National Association of Federal Credit Unions, National Association of Home Builders, and the National Association of Realtors. However, opponents of the Act, such as the Center for Responsible Lending and Consumer Federation of America, worry that the amendment will allow lenders to charge excessive title fees to affiliated entities while remaining within the protections that the qualified mortgage rule affords.

The Act passed the House by unanimous vote and awaits a determination in the Senate. If passed, the Act instructs the Consumer Financial Protection Bureau to finalize regulations implementing the new definition within 90 days.