House Passes Bill Easing Regulatory Requirements for Regional and Mid-Size Banks
On December 12, 2017, the House of Representatives, by a vote of 294 to 129, passed a bipartisan bill aimed to bring regulatory relief to community banks.
The bill, named the Community Institution Mortgage Relief Act (H.R. 3971), proposes safe harbors for certain institutions from the Truth In Lending Act’s (TILA) and the Real Estate Settlement Procedures Act (RESPA) requirements of escrow accounts for riskier borrowers. The bill does not prohibit banks from offering escrow services should they choose to offer them.
While the escrow accounts ensure that borrowers have funds for taxes and insurance on their property, the bill’s author, Claudia Tenney (R-NY), stated that current regulations in place especially burden community banks in dealing with the cost and staffing to maintain escrow accounts for their mortgage loans. To be eligible for the safe harbor provision, the bank must:
- Have consolidated assets of $10 billion or less
- Hold the loans on the balance sheet for three years
In the case for mortgage services, the company must service fewer than 20,000 loans annually to qualify for the exemption.
Rep. Tenney stated that with the passing of this bill, banks will be able to hold more mortgages and reverse the trend of community banks being driven out of the mortgage lending market and also reverse trend of the shrinking number of banks and credit unions in the U.S.
The bill was co-sponsored by Brad Sherman (D-CA), Roger Williams (R-TX), David Loebsack (D-IA), and Pete Session (R-TX).