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Critical Time for the Consumer Mortgage Choice Act

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By Ken Trepeta

As we enter the August Congressional recess, we enter a critical period for key legislation, including the Consumer Mortgage Choice Act, H.R. 1077, and its Senate Companion, S. 949, introduced in May by Senators Joe Manchin (D-WV) and Mike Johanns (R-NE). Both of these bills fix the definition of fees and points in the Qualified Mortgage (QM) and Qualified Residential Mortgage (QRM) rules under the Dodd-Frank Wall Street Reform Act. In short, it reduces the discrimination against affiliate businesses and small and mid-size lenders.

Much progress has been made in the House of Representatives. NAR testified in favor of the legislation and worked with our coalition to obtain 45 co-sponsors. NAR also helped advance the effort in the Senate. However, the legislation is being targeted by consumer groups who claim there are rampant “kickbacks” in affiliate businesses and that affiliate businesses overcharge consumers, particularly with regard to title insurance. We have made a concerted effort to refute these false charges.

First of all, there is no data to show that there is any truth to these allegations. Second, what consumer groups forget is that RESPA bans all kickbacks. Third, the Consumer Financial Protection Bureau (CFPB) not only enforces the QM rule, but enforces RESPA as well. They have much more power than HUD does and can bring actions on their own if they truly believe there are kickbacks being given. Fourth, title insurance is regulated at the state level, and the states are the proper venue for addressing any issues of title insurance rates and regulation. Finally, RESPA prohibits the required use of affiliates, requires disclosure of affiliate relationships, and prohibits giving anything of value for the referral of settlement services.

It is critical that firms that support ending this discrimination reach out to their local Congressman and Senators and urge the prompt enactment of H.R. 1077 and S. 949. It does not matter if you personally know your Congressman or Senator. You are one of their constituents and represent businesses in their district or state.

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