On November 18, 2015, the U.S. House of Representatives passed a bill that would provide a safe harbor exception for depository institutions from certain provisions of the Truth in Lending Act and Regulation Z, and for mortgage originators from the steering prohibition of the loan originator compensation requirements under Regulation Z (LO Comp Rule). By a vote of 255 to 174 the House passed the “Portfolio Lending and Mortgage Access Act” (H.R. 1210). The text of the bill can be found here. To take effect immediately, the bill would expressly exempt depository institutions from suit for violation of the Truth in Lending Act’s general ability to repay requirements and certain related requirements with respect to a loan that, since origination, the creditor has held on their balance sheet, while the loan also complies with the prepayment penalty restrictions imposed by Dodd-Frank on qualified mortgage loans. Such a loan could qualify for the safe harbor even if it provided for a balloon payment.
The bill would also provide a safe harbor for loan originators from the LO Comp Rule’s prohibition on steering a consumer from a mortgage loan for which the consumer is qualified and that is a qualified mortgage loan to a non-qualified mortgage loan, when the originator and the consumer receive a statement of intent from the creditor indicating that the creditor intends to hold the loan on their balance sheet for the life of the loan and that creditor is a depository institution.
Proponents of the bill state that under current requirements, customers are forced to fit into certain prefabricated financial products, thus limiting access to credit for some demographic groups. Opponents of the bill claim the safe harbor would create a sense of déjà vu for the types of financial products that led to the 2009 financial crisis. The bill now heads to the Senate where its prospects remain uncertain. Per the White House, the President has threatened that if presented with the bill he would issue a veto.