By Rod Alba
The American Bankers Association continues its advocacy efforts on multiple issues that affect mortgage lending. Here is a rundown of important recent news and activities:
House advances ABA-backed bills
The House Financial Services Committee passed several ABA-advocated bills, including a bill to promote the formation of new banks; a bill to prohibit the Fed from issuing a retail central bank digital currency; and a bill to repeal the Consumer Financial Protection Bureau’s small-business lending data collection rule. The last item pertains to Section 1071 of the Dodd-Frank Act imposing mandates for the collection and reporting of loan application data from small businesses owned by women, minorities and LGBTQ+ individuals. ABA is engaging in strong advocacy in support of H.R. 976, the 1071 Repeal to Protect Small Business Lending Act.
Effect on banks: Section 1071of Dodd-Frank Act has been a primary concern to banks of all sizes across the country. While 1071 provisions focus on small-business lending, the provisions also affect residential finance by requiring adjustments to loan origination systems and reporting processes to verify business versus residential classifications, and by inflating overall costs and lowering speeds of loan processing for small-business and residential loans. ABA has expressed concerns that under Section 1071, Congress only mandated that lenders collect and report 13 data points from small-business loan applicants. In implementing these provisions, the CFPB far exceeded the legislative grant of authority by requiring collection of 81 data fields on lending applications. ABA has advanced that the Section 1071 rule harms small businesses by adding significant operational costs and risks, limiting banks’ ability to tailor loans and thereby reducing credit access and increasing cost of credit for small businesses.
ABA calls for CFPB reforms
In a statement submitted for the record in a House Financial Services Committee hearing, ABA expressed its support for several bills that would make fundamental changes to the CFPB’s structure to strengthen accountability and clarify its legal authority. The hearing, titled “A new era for the CFPB: Balancing power and reprioritizing,” featured multiple panelists that focused on the CFPB’s use of enforcement action without clear regulatory guidance and creating uncertainty and compliance risk. Panelists also highlighted reliance on unfair, deceptive, or abusive acts or practices and the undefined nature of due process in civil investigative demands.
Effect on banks: It is critical that CFPB operates within the scope of its authority, according to ABA. In the coming months, ABA will advocate for controls on CFPB’s ability to overstep its legislative boundaries with more structured checks and balances to ensure that its authority is exercised wisely and fully for the benefit of consumers and consistent with law and due process.
ABA focused on GSE reforms
In March, Bill Pulte was confirmed as director of the Federal Housing Finance Agency. He immediately announced that reforms to Fannie Mae and Freddie Mac would be his top priorities and promised “big announcements coming soon.”
Effect on banks: Topics that will guide ABA’s discussions with FHFA include: GSEs must be strictly confined to a secondary market role of providing stability and liquidity to the primary mortgage market for qualified low- and moderate-income borrowers; entities must support all segments of the primary market, under all economic environments; entities must provide equitable access to all eligible primary market lenders; and GSE-issued mortgage-backed securities should carry explicit, fully priced and transparent guarantees from the federal government. (See ABA’s submission to Congress outlining principles for GSE reform.)
Regulators to scrap 2023 CRA rule
The banking agencies announced their intention to rescind the 2023 Community Reinvestment Act rule, citing the lawsuit against this rule filed by ABA and others. They will instead reinstate the CRA framework that was in place before the rule.
ABA, the U.S. Chamber of Commerce and five national and state associations sued the banking agencies in federal court, arguing that regulators exceeded their statutory authority. A federal judge last year issued a preliminary injunction against enforcing the rule. ABA will continue to work with the agencies on supporting local communities and expanding economic opportunities.
Effect on banks: Under the provisions of the final 2023 CRA regulations, banks would have been required to make significant changes to assessment areas and would have faced alterations to eligible community development activities under more rigorous evaluations for large banks. The ABA’s judicial challenge and the agencies’ announcement confirm that banks will not need to comply with the 2023 rule.
Trigger lead legislation is reintroduced
As a result of continued work by ABA, legislation regulating trigger leads in the mortgage market was reintroduced in Congress on April 10. The bills were advanced by Reps. John Rose (R-Tenn.) and Ritchie Torres (D-N.Y.) and Sens. Bill Hagerty (R-Tenn.) and Jack Reed (D-R.I.), with provisions premised on previous versions of the Homebuyers Privacy Protection Act for the 119th Congress (H.R. 2808 and S. 1467). The bills have bipartisan support and the support of broad swaths of the mortgage finance industry, including ABA, the Mortgage Bankers Association and the National Association of Mortgage Brokers. The proposed legislation attempt to limit the distribution and use of trigger leads sold by the national credit reporting agencies to various mortgage companies, unless the company was given proper consent, originated the loan or has a current banking relationship with the consumer.
Effect on banks: ABA has worked with industry allies to build strong bipartisan agreement in Congress for legislation that curbs the use of trigger leads. Bankers agree on needed controls and protections for consumers against confusing and often abusive waves of phone calls, texts, emails or direct mail solicitations when homeowners apply for mortgages. The reintroduction of these two bills will begin a new push to control abusive use of trigger leads and ABA, along with coalition partners, will continue efforts to work with congressional allies to advance needed legislative fixes.
