House Committee Begins Markup of Industry Legislation; MBA Sends Letter

Mike Sorohan msorohan@mba.org

July 12, 2019

The House Financial Services Committee yesterday began a markup session on a number of housing finance-related bills. Ahead of the first votes, the Mortgage Bankers Association sent a letter to Committee leadership offering views of several bills of interest to MBA membership.

A summary appears below:

Expanded Access to Appraisals
MBA strongly supports H.R. 2852, the Homebuyer Assistance Act of 2019 (https://www.govtrack.us/congress/bills/116/hr2852), introduced by Reps. Brad Sherman, D-Calif., and Sean Duffy, R-Wis. The bill would allow lenders to address supply shortages by expanding their appraiser pools, which in turn could reduce consumer costs and shorten delays that have occurred in many markets. More broadly, said MBA Senior Vice President of Legislative and Political Affairs Bill Killmer, the bill could create a more efficient residential mortgage market for lenders and consumers by expediting valuations and lowering closing costs.

"As lenders serving homeowners in rural areas throughout the country struggle to obtain appraisals in a timely manner, this legislation would allow more appraisers practicing in the field today to become eligible to conduct real estate evaluations on properties subject to mortgages insured by the Federal Housing Administration," Killmer said.

Proposals to Amend Fair Credit Reporting Act
MBA expressed concerns with the Clarity in Credit Score Formation Act of 2019 (https://financialservices.house.gov/uploadedfiles/bills-116pih-clarityscore.pdf), introduced by Rep. Stephen Lynch, D-Mass., which gives authority to the Consumer Financial Protection Bureau to oversee the development of credit scoring models, study and analyze the impact of new data and modeling techniques on communities historically underserved by the credit markets, and prohibit credit scoring model developers from including certain inputs.

"MBA has strong concerns with many provisions within this proposal," Killmer wrote. "At a high level, the role of federal regulators with respect to credit scoring models should be to ensure such models exceed a minimum threshold of predictive capacity, while also remaining in compliance with fair lending requirements. If the CFPB or any other regulator was able to regularly change the weighting of various model inputs, or remove certain inputs altogether, the predictive capacity of the models could be seriously jeopardized. Such actions would then result in less sustainable mortgage lending, which would harm the very consumers that policymakers and market participants are attempting to better serve."

More specifically, MBA cautioned amendments to the Fair Credit Reporting Act not require "downstream" users of credit scores, such as mortgage originators, mortgage servicers and mortgage insurers, to be subject to new requirements on the validity of these models. Further, any new requirements contemplated by Congress should be harmonized with existing requirements already enforced by other regulators, such as the federal banking regulators. Finally, the CFPB or other regulators should not be granted authority to deem certain model inputs as "inappropriate" for reasons other than those already provided under fair lending laws.

Additionally, MBA noted the Improving Credit Reporting for All Consumers Act, (https://financialservices.house.gov/uploadedfiles/bills-116pih-impcredit.pdf), introduced by Rep. Alma Adams, D-N.C., includes a provision that has the potential to increase uncertainty for lenders and consumers alike by providing injunctive relief under FCRA.

"This proposal could result in a new patchwork quilt of FCRA interpretations, as opposed to a national standard administered by the Federal Trade Commission and the CFPB," Killmer wrote. "The likely result would be greater confusion for consumers seeking relief, increased legal liability and uncertainty for mortgage lenders and, ultimately, increased cost of credit for consumers. Therefore, MBA opposes this portion of the proposal and recommends that the Committee more fully contemplate the potential consequences of this provision before advcancing the legislation."

The markup session is expected to continue through next week.

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