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Congress passes Dodd-Frank relief bill

The U.S. House of Representatives approved a bank regulatory-relief bill late on Tuesday, clearing the way for the first meaningful changes to the Dodd-Frank Wall Street Reform and Consumer Protection Act since the sweeping post-crisis overhaul of the financial-services sector was enacted in 2010.

The House took up an identical version of a bill passed in the U.S. Senate in March that garnered support and cosponsors from moderate Democrats. Mortgage-trade lobbyists expected the bill to clear the House without amendments, despite opposition from most Democrats. The bill can now be sent directly to President Donald Trump.

reformbillSmall community banks and credit unions were considered the biggest winners in the bill, known as the Economic Growth, Regulatory Relief and Consumer Protection Act. The bill passed in the House by 258-159 with 33 Democrats in support.

“Not much is being passed out of Congress and signed into law in this current, contentious, partisan environment,” said Paul Merski, executive vice president for congressional relations at the Independent Community Bankers of America.

“To get a bipartisan reg relief bill that addresses Dodd-Frank laws that have been virtually untouched since the Dodd-Frank law went into place eight years ago is a pretty interesting and amazing feat,” he said.

Other industry groups also supported the bill, although the Mortgage Bankers Association and nonbank trade associations say some of the relaxed rules should be extended to nonbanks. 

The most significant and controversial change will loosen federal oversight on larger regional banks. The bill raised the threshold at which banks are subject to heightened federal oversight as systemically important financial institutions. That threshold will rise from the current level of $50 billion in assets to eventually all banks with assets over $250 billion, which includes almost all financial institutions. 

The bill also exempts small banks from the Volcker rule that prohibits banks from making speculative investments.  

Among the provisions directly affecting the mortgage industry, smaller banks and credit unions — institutions with assets less than $10 billion— would have greater flexibility and legal protection for home loans they hold in portfolio. The bill extends "qualified mortgage" status to these portfolio loans, so long as the loans conform to the federal caps on points and fees or are not prohibited loan types, such as interest-only loans. Few lenders are making loans outside of QM because of the potential legal liability.  

Banks and credit unions that do fewer than 500 loans or 500 lines of credit in a year also would be exempt from the greatly expanded reporting requirements under the Home Mortgage Disclosure Act (HMDA). 

In addition, the legislation also amends the S.A.F.E. Mortgage Licensing Act of 2008 to allow bank originators to obtain a temporary license to originate loans for a nonbank or move to another state while they complete the additional licensing requirements for nonbank originators.

“The SAFE Act transitional license is a very big deal for my nonbank members,” said Rob Zimmer, director of external affairs for the Community Mortgage Lenders of America. “It is not a sexy issue, but it has always been a big deal to my members.”  

Nonbank lenders would otherwise be largely unaffected by most of the other provisions of the bill, however. 


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