The House passed legislation Wednesday that critics argue rolls back regulations for mortgages that were created to prevent the bad lending practices responsible for the financial crisis of 2008.
The Portfolio Lending and Mortgage Access Act, which was introduced by Rep. Andy BarrAndy BarrThe Hill's Whip List: 36 GOP no votes on ObamaCare repeal plan A guide to the committees: House How we can boost the economy through foreign direct investment MORE (R-Ky.), passed by a 255-174 vote. The bill extends a federal exemption meant for small and rural banks to all banking institutions.
The Consumer Financial Protection Bureau (CFPB) issued regulations last year that require lenders to ensure a borrower’s ability to repay a loan in order to obtain a qualified mortgage status, which provides lenders a “safe harbor” protection from federal penalties and lawsuits brought by borrowers who have defaulted on their loans.
Though opponents of the bill say the legislation will open the door to the reckless lending practices of the past, supporters say there is a safety valve in place. Under the legislation, a lender would lose the “safe harbor” protection if the loan is securitized or sold into a secondary market.
“The aim of H.R. 1210 is simple: Banks and credit unions should be free to originate mortgages as long as they keep them on their books. As long as they keep the risk. This is responsible lending,” said House Financial Services Committee Chairman Jeb Hensarling (R-Texas).
But Rep. Maxine Waters (Calif.), the top Democrat on the House Financial Services Committee, warned it would undo a key part of new rules established by the CFPB in the wake of the 2008 financial crisis.
“The bill undermines the anti-predatory lending provisions of the Dodd-Frank Act and virtually eliminates one of the most significant consumer protection rules implemented by the CFPB,” Waters said.
The Obama administration has issued a veto threat against the bill, warning it “would undermine the essential protections provided under the Qualified Mortgage rule.”