House Passes Measure Removing Barriers on Small Dollar Mortgages

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Congress at NightThe U.S. House of Representatives has passed seven bipartisan bills introduced by House Financial Services Committee members, several directly impacting the mortgage industry.

Passing the House was the Improving FHA Support for Small Dollar Mortgages Act (H.R. 1532), a bill sponsored by Rep. Rashida Tlaib (D-MI), which would require the FHA to conduct a review of its policies to identify any barriers to supporting mortgages under $70,000 (“small dollar mortgages”), and report to Congress within a year with an action plan for removing such barriers.

Specifically, H.R. 1532 requires HUD to report on policies, practices, and products used by the FHA and actions that will be taken to remove such barriers or impediments to supporting, facilitating, and making available mortgage insurance for mortgages having an original principal obligation of $70,000 or less. According to the Urban Institute, small dollar mortgage applications were denied by lenders at double the rate of denial for large mortgage loans in 2017—a difference in denial rates not fully explained by differences in applicants’ credit profiles. Rep. Tlaib sees the measure as an important step toward bolstering the FHA’s mission “to serve creditworthy borrowers who are underserved.”

“Today, I am even prouder of my colleagues for bringing us one step closer toward making it law and ensuring every family has access to the American Dream that is homeownership,” said Rep. Tlaib.

Also passing is the Housing Financial Literacy Act of 2021 (H.R. 1395), a bill by Rep. Joyce Beatty (D-OH) that would require the Secretary of the U.S. Department of Housing & Urban Development to discount upfront mortgage insurance premium payments by 25 basis points for FHA single-family first-time homebuyers who complete a HUD-certified housing counseling program. This translates into a cost savings for first-time homebuyers of $250 for every $100,000 financed through a Federal Housing Administration (FHA) mortgage.

“Whether you are managing your credit, creating a budget, saving for retirement, or purchasing a home, understanding the basic principles of planning, saving, and investing for the future are vitally important,” said Rep. Beatty. “Studies show that pre-purchase housing counseling empowers first-time homebuyers to make more informed financial decisions that ultimately benefit their family’s financial future, the neighborhood, and entire economy.”

H.R. 1395 is awaiting further consideration by the U.S. Senate.

Additional legislation passed by the House included:

  • The SAFE Banking Act (H.R. 1996), a bipartisan bill by Rep. Ed Perlmutter (D-CO), which would help ensure cannabis businesses operating in nearly all states that have legalized its use have access to basic banking products and services, by a vote of 321-101.
  • The Promoting Transparent Standards for Corporate Insiders Act (H.R. 1528), a bill by Rep. Maxine Waters (D-CA), which would direct the Securities and Exchange Commission to study and report on possible revisions to regulations regarding 10b5-1 trading plans; such plans allow certain employees of publicly traded companies to sell their shares without violating insider trading prohibitions.
  • The Fair Debt Collection for Servicemembers Act (H.R.1491), a bill by Rep. Madeleine Dean (D-PA), which would amend the Fair Debt Collection Practices Act (FDCPA) to explicitly prohibit a debt collector from threatening or otherwise representing to servicemembers that failure to cooperate with a debt collector will result in a reduction of rank, a revocation of security clearance, or military prosecution.
  • The Senior Security Act (H.R.1565), a bill by Rep. Josh Gottheimer (D-NJ), which establishes a Senior Investor Taskforce (Taskforce) within the U.S. Securities and Exchange Commission.
  • The Eliminate Barriers to Innovation Act of 2021 (H.R. 1602), a bipartisan bill by Rep. Patrick McHenry (R-NC), which would direct the Securities and Exchange Commission and the Commodity Futures Trading Commission to establish a working group on digital assets that would report to Congress.

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