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Consumer Mortgage Choice Act Draws Criticism from CRL

The ""Center for Responsible Lending"":http://www.responsiblelending.org/ (CRL) again voiced its opposition to legislation that would amend the Truth in Lending Act (TILA) to exclude certain factors when calculating points and fees for determining qualified mortgage (QM) eligibility.

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The bill, ""H.R. 1077"":http://www.govtrack.us/congress/bills/113/hr1077#overview (the ""Consumer Mortgage Choice Act""), would exclude loan originator salaries, insurance and taxes held in escrow, and loan level pricing adjustments by government agencies or GSEs when computing points and fees.

According to ""Rep. Bill Huizenga"":http://huizenga.house.gov/ (R-Michigan), the Consumer Mortgage Choice Act is designed to improve access to credit and QM for low- and moderate-income borrowers while preserving consumer protections from bad loans.

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In a ""letter"":http://www.responsiblelending.org/mortgage-lending/policy-legislation/congress/2013-afr-signon-letter-opposing-hr-1077-april-9.pdf to Congress, however, CRL argues that H.R. 1077 ""promotes steering borrowers into more expensive loans"" and ""creates new loopholes that would allow loans with higher costs and fees to improperly meet"" QM standards.

""Congress has outlawed many of the risky lending practices that were prevalent in the subprime mortgage market and which sparked a flood of foreclosures and the economic recession,"" CRL said in a release. ""H.R. 1077 would now legalize these same risky features and create new incentives for abusive lending.""

In a separate document, CRL notes that inflated origination costs disproportionately impacted black and Latino borrowers during the subprime crisis, asserting that the bill ""would create new opportunities to increase loan fees in the future.""

""The approach taken in this bill, which is misleadingly named the Consumer Mortgage Choice Act, is a flashback to the recent subprime crisis. During the subprime lending boom, borrowers often paid excessive origination costs ... These inflated origination costs stripped borrowers of valuable home equity--built over years of steady payments in the case of refinance loans--and simultaneously trapped them in loans with inflated interest rates,"" CRL said.

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