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Monday, May 20, 2013

Senate Bill Addresses QM Rule’s Affiliated Product Sales Restrictions

Senator Joe Manchin (D-WV), together with Senator Mike Johanns (R-NE), introduced S. 949 on May 14, which would amend the Truth in Lending Act (TILA) and redefine the definition of points and fees charged in connection with a qualified mortgage.

The Dodd-Frank Act (DFA) has a definition for qualified mortgages (QM) that includes a cap on the points and fees charged to consumers on any given loan. The Consumer Financial Protection Bureau (CFPB) interpreted the statute in such a way as to discriminate against products and services sold to consumers from affiliated entities of the lender, meaning that charges for an insurance product, like the premium for title or homeowners insurance, sold by a bank-owned agency would be included in the points and fees calculation but the same products sold independently would not.

To rectify this interpretation requires congressional action. A House bill introduced by Representative Huizenga (R-MI) on March 12 would solve this problem also. HR 1077 removes the discriminatory treatment of affiliated product sales and has 34 co-sponsors including former Financial Services Committee Chairman Spencer Bachus (R-AL) and House Foreign Affairs Chairman Ed Royce (R-CA).