Housing bill provision could burden smaller lenders

While noting their general support for the overall  legislation, there are significant concerns with a section of the Renewing Opportunity in the American Dream (ROAD) to Housing Act America’s Credit Unions and the Independent Community Bankers of America told Congressional leaders in a letter Monday. 

The bill is designed to increase housing supply and improve affordability, and cleared the Senate Banking Committee in July. The text of the bill was also added to the Senate version of the National Defense Authorization Act (NDAA) and is under consideration for the final NDAA package currently being negotiated between the House and Senate. 

Section 705 of the ROAD to Housing Act would amend Truth in Lending Act and force lenders to develop and apply additional, highly prescriptive reconsideration of value (ROV) processes to mortgage loans held in portfolio.  This could ultimately impose operational and compliance burdens on small lenders that keep mortgages in portfolio.

“Our organizations urge Congress to work with stakeholders to refine Section 705 so that it achieves its intended purpose without imposing disproportionate burdens on our member institutions,” the letter reads. “We believe this can be achieved by targeting the requirements to loans sold to Fannie Mae, Freddie Mac, or mortgage loans insured or guaranteed by the Federal government. This approach would help the small local lenders continue to serve their customers by offering tailored loans to their customers without unnecessarily prescriptive operational ROV requirements.”

Read the letter