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House passes bills to protect VA, FHA borrowers

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Legislation
Friday, July 12, 2019

The House recently voted overwhelming in favor of six bipartisan bills, two of which would better protect borrowers seeking loans secured by the Department of Veterans Affairs (VA) and would provide increased access to housing counseling, respectively. The other bills are aimed at improving policies affecting small business lenders and investors.

The Mortgage Bankers Association (MBA) and Ginnie Mae expressed strong support for two of the bills – H.R. 1988, the “Protecting Affordable Mortgages for Veterans Act,” and H.R. 2162, the “Financial Literacy Act.”

H.R. 1988, a companion bill to S. 1749, passed by voice vote under suspension of rules. The House then passed the Senate version of the bill by voice vote as well, sending that bill to the president’s desk. If signed into law, the legislation would clarify when VA home loans are qualified to be pooled into Ginnie Mae securities.

MBA wrote to House leaders ahead of the vote, urging them to pass both bills. MBA noted that H.R. 1988 would close a loophole that allows for harmful mortgage loan churning targeted at service members and veterans by implementing Section 309 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA).

The bill implements new requirements, including a 210-seasoning period for an initial loan before it can be refinanced, combined with at least six monthly payments by the borrower. MBA noted that the calculation of the 210-day seasoning period in Section 309(a) “deviated from well-understood seasoning requirements already in place through directives issued by Ginnie Mae.”

“The new requirements of Section 309(a) begin the seasoning period on the date on which the first payment is made by the borrower. In many situations, the lender offering the refinance cannot know this date with certainty — particularly if the lender is not the servicer of the initial loan,” MBA wrote. “The bill corrects this problem by beginning the 210-day seasoning period on the first payment due date of the initial loan, which will allow lenders greater compliance certainty and better ensure that loans are not erroneously pooled into Ginnie Mae securities. Importantly, nothing in this legislation weakens the consumer protections that were put in place through the original legislation. The bill would also provide the added benefit of ensuring the Ginnie Mae eligibility of re-performing VA refinance loans that are bought out of pools as servicers consider loss mitigation options.”

MBA also expressed support for H.R. 2162, which modifies the discount given by the Federal Housing Administration (FHA) on single-family mortgage-insurance premium payments for first-time homebuyers who complete a financial-management counseling program. MBA noted that it long has advocated for increased access to housing counseling to provide help to first-time homebuyers unfamiliar with the homeownership process, as well as for other underserved communities. MBA, however, recommended some changes to the legislation, which passed by voice vote.

“While MBA conceptually supports the goals of this bill, including improving financial literacy and making homeownership more attainable, MBA also recommends that any legislative change to FHA’s premium structure maintain HUD’s discretion to set insurance premiums that are consistent with actuarial evidence accepted by HUD,” MBA wrote.

Also passing by voice vote was H.R. 2919, the “Improving Investment Research for Small and Emerging Issuers Act,” which would require the Securities and Exchange Commission (SEC) to report on investment research regarding small issuers, including emerging growth companies and companies considering initial public offerings.

The three other bills also pertained to SEC policies, as well as small business investment and lending activities.

The House voted 410-12 to pass H.R. 2515, which would to extend anti-retaliation whistleblower protections.

H.R. 3050 passed by a 417-2 margin and would direct the SEC to report on limitations on how many shares of an individual company a diversified investment company may own, and the impact on such a limitation on capital formation.

H.R. 2409 was approved by a 413-7 count and would expand the duties of the SEC’s advocate for small business capital formation to include reporting on issues encountered by rural-area small businesses.

Today's other top stories
Senate passes budget package, industry welcomes borrower-friendly provisions
Real estate lenders welcome nixing of ‘retaliatory’ taxes on foreign investors
FHFA directs GSEs to incorporate crypto assets into mortgage risk assessments
MBA supports eliminating HUD multifamily green housing proposal
Regulatory Roundup: Agencies release CRA assessment data, April home price index


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