House approves legislation to ease rules on home loans
WASHINGTON (AP) The House on Tuesday overwhelmingly adopted legislation to ease some mortgage lending requirements of the sweeping 2010 law reining in banks and Wall Street as the Republican majority continues its assault on the so-called Dodd-Frank law enacted after the financial crisis.
The House first voted 263-162 on a bill to ease some curbs on lending for mobile and modular homes. Lawmakers then voted 286-140 for a second measure that would ease restrictions aimed at making sure consumers can repay their loans but which bill sponsors say has had the effect of making it more difficult for some prospective borrowers to obtain credit.
The first vote fell short of the two-thirds that would be required to overcome a veto threat issued by President Barack Obama on Monday. The second measure garnered the two-thirds vote necessary to override a veto.
In threatening a veto, the White House had warned that the bills would permit borrowers to be "steered" into higher-cost loans.
Home mortgages were a flashpoint of the 2008 financial crisis that brought on the Great Recession. Ahead of the crisis, banks sold to investors bundles of risky high-interest mortgages. Millions of home borrowers ended up defaulting on the loans when the interest rates spiked and the housing market bubble burst in 2007. The value of the mortgage securities held by banks and other investors plummeted.
Republican lawmakers pushing the legislation say it would provide relief from regulatory overreach for low- and moderate-income Americans looking to buy a home.
"We have struggling constituents who want to own that first home, who want a break on their (mortgage) closing costs," Rep. Jeb Hensarling of Texas, chairman of the House Financial Services Committee, said at a news conference on Tuesday.
The committee's top Democrat, Rep. Maxine Waters of California, insisted that the legislation would roll back consumer protections "and leave many low-income and minority families exposed to the kinds of predatory practices that were commonly used in the run-up to the financial crisis."
One of the bills would exclude some expenses, such as set-asides for future insurance payments, from figuring into the total points and fees for a mortgage as spelled out to borrowers. There is a legal requirement that points and fees not exceed 3 percent of the total loan amount, in order for mortgage lenders to be deemed as having made a reasonable loan with strong chances of being repaid.
The other bill would ease some restrictions on mortgage lending for mobile and modular homes, such as those designed to reduce conflicts of interests when sellers of the homes make the loans. In addition, the definition of high-cost mortgages for such homes would be narrowed.
Many borrowers buying mobile homes "are among the lowest income and economically vulnerable consumers," the White House said in its veto message. The bill would put them "at significant risk of being subjected to predatory lending and steered into more expensive loans even when they qualify for lower-cost alternatives."
"When it comes to manufactured housing, consumers are already exposed to significant risk high interest rates, the inability to refinance, and in many cases, depreciation that starts as soon as the manufactured home is sold," Waters said.
But bill sponsors said the Dodd-Frank regulations are having the unintended consequence of restricting access to manufactured homes because the loan origination and servicing costs for low-cost manufactured houses violate limits set under Dodd-Frank.
The Republicans enlarged their majority in the House and captured control of the Senate in the November elections. In January, the GOP-led house passed a package easing a number of requirements for banks and Wall Street under the 2010 Dodd-Frank law, and Tuesday's legislation continued the drive.
In the Senate, however, Republicans are more likely to work on compromises with their Democratic colleagues and to put it through a time-consuming legislative process.