Newly passed U.S. Dodd-Frank Reform Impacts Mortgage Lending

On March 13, 2018, the U.S. Senate voted 67 to 31 in favor of the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155), legislation that would reform provisions of the Dodd-Frank Act. Sixteen Democrats and one Independent joined with Republicans to pass the bill.

How will this impact mobility? For the relocation of a transferee that involves the sale and/or purchase of a home, changes to this legislation will amend certain mortgage lending requirements.

Changes to policies of the Dodd-Frank Act include amending certain mortgage lending requirements, allowing financial institutions with less than $10 billion in assets to enter into relationships with certain monetary fund managers and modifying stress testing for certain banks. There are several provisions which are intended to provide financial institutions with greater flexibility regarding the offering of mortgages as well.

For one, S. 2155 raises the threshold for banks in which mortgages can be considered qualified mortgages under the small creditor category from $2 billion to $10 billion in assets. The bill would also exempt appraisal requirements in rural areas for homes under $400,000 if a qualified appraiser cannot be retained. Another provision includes a “No Wait for Lower Interest Rates” rule. Currently, the lender must provide information regarding the annual interest rate and monthly payments to the borrower at least three days before the closing. The bill would allow the lender to offer and provide the details of a lower interest rate within the three days without requiring a delay in closing.

S. 2155 would additionally extend the Protecting Tenants at Foreclosure Act of 2009, which applies to the foreclosure of property financed with a federally-related mortgage. (Dodd-Frank extended the protections through the end of 2014.) The Act requires the lender on a foreclosed property to give the borrower 90 days’ notice to vacate the premises. In situations where the foreclosed property is being rented, the lender must allow the tenant to stay through the end of the lease unless the new purchaser plans to use the property as a primary residence. Another provision of interest would clarify that appraisers who donate their services to non-profit organizations like Habit for Humanity aren’t subject to the Dodd-Frank requirement that they charge a “customary and reasonable” amount.

Next steps on the bill are uncertain. House Republican Leadership has indicated the House will not simply pass S. 2155. Last July, the House passed a more comprehensive proposal (H.R. 10) to reform Dodd-Frank which was supported by nearly all House Republicans but opposed by all House Democrats. House Financial Services Committee Chairman Jeb Hensarling (R-TX) and other House Republicans would like to add certain provisions of H.R. 10 to S. 2155. But Senate Democrats who voted for S. 2155 are not supportive of H.R. 10 or making any changes to S. 2155, making it a delicate balancing act to further move a bill supported by a majority in the House as well as Senate.

Read More