Members of the Senate Committee on Banking, Housing, and Urban Affairs have released the full text of a bill that includes regulatory reform in the financial services industry. The Economic Growth, Regulatory Relief and Consumer Protection Act affects mortgages, consumer credit, bank holding companies, consumer protections, and regulatory relief for community banks. Republicans on the Senate Banking Committee called the bill "right-sizes regulation for smaller financial institutions and includes important consumer protections for veterans, senior citizens and victims of fraud." A section-by-section analysis of the bill was also released.
Qualified Mortgages. The bill provides that mortgage loans originated and retained in portfolio by an insured depository institution or an insured credit union with less than $10 billion in total consolidated assets will be deemed qualified mortgages under the Truth in Lending Act (TILA) while maintaining consumer protections.
The bill also provides a tailored exemption from appraisal requirements under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 for certain mortgage loans with a balance of less than $400,000 if the originator is unable to find a state-certified or state-licensed appraiser to perform an appraisal after a good faith effort to do so.
Community Banks. The bill would require that the federal banking agencies establish a community bank leverage ratio of equity to average consolidated assets of not less than eight percent and not more than 10 percent. Banks with less than $10 billion in total consolidated assets who maintain tangible equity in an amount that exceeds the community bank leverage ratio will be deemed to be in compliance with capital and leverage requirements.
The bill would provide regulatory relief to small depository institutions that have originated less than 500 closed-end mortgage loans or less than 500 open-end lines of credit in each of the two preceding calendar years by exempting them from certain disclosure requirements under the Home Mortgage Disclosure Act.
Consumer credit. Under the bill, credit bureaus would be required to include in the file of a consumer fraud alerts for at least a year under certain circumstances, provide consumers one free freeze alert and one free unfreeze alert per year, and provide further protections for minors.
Bank holding companies. The bill contains efforts to tailor regulations for bank holding companies. The bill raises the threshold for applying enhanced prudential standards from $50 billion to $250 billion. Bank holding companies with total consolidated assets between $50 billion and $100 billion will be exempt from enhanced prudential standards immediately, and bank holding companies with total consolidated assets between $100 billion and $250 billion will be exempt 18 months after the bill's effective date.
Required reports. The bill would require the Treasury Department to submit a report to Congress on the risks of cyber threats and the SEC to report on the risks and benefits of algorithmic trading.
Industry reaction. The Mortgage Bankers Association applauded the bill. David H. Stevens, MBA’s President and CEO, commendedbill sponsor Rep. Mike Crapo (R-Idaho) "for reaching a bipartisan compromise on regulatory relief legislation designed to lessen some burdens on lenders, allowing them to better serve their customers and consumers." MBA cited the inclusion of language amending the SAFE Act "to provide increased job mobility for loan originators," and language addressing concerns with PACE lending, HMDA, and the TILA/RESPA integrated disclosure.
Companies: Mortgage Bankers Association
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