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Friday, October 18, 2013

Bill would Amend TILA's "Points and Fees" Definition-Effect on Homeowners & Title Insurance?

By ABIA Outside Counsel Chris Datskos, McIntyre & Lemon, PLLC

Congressman Bill Huizenga introduced the Mortgage Choice Act of 2013, which would amend the Truth in Lending Act’s (TILA) definition of “points and fees” in connection with a mortgage transaction.

Under the CFPB's QM Rule, a mortgage loan cannot qualify as a QM loan if points and fees associated with the loan are in excess of 3 percent of the loan amount. Among other changes, Huizenga's bill would exclude from the definition of "points and fees" the escrow for future payment of insurance (TILA currently excludes escrow for future payment of taxes).

Homeowners Insurance
Any insurance amount that is escrowed would benefit from the carve-out. If homeowners insurance is escrowed in a mortgage transaction, which it typically is, such insurance would not be included in the definition of "points and fees."

Title Insurance
Since title insurance is not escrowed, it would not be able to take advantage of the limited carve-out. This bill makes more targeted amendments to TILA's definition section than Huizenga's previous HR 1077, which was introduced in March and is still being considered in the House Financial Services Committee.

Learn more about H.R. 3211