The House Committee on Financial Services has sent the Financial CHOICE Act of 2017 for consideration by the House of Representatives.
Also known as H.R. 10, the bill is meant to replace the Dodd-Frank Act or at least repeal some of its provisions that “make America less prosperous, less stable, and less free…” according to the bill’s main author, Rep. Jeb Hensarling (R-Texas) who also chairs the House Financial Services Committee.
The Financial CHOICE Act
Back in April, a 589-page draft of the Financial CHOICE Act — an updated version of an earlier bill — was introduced to the House. On May 4, the House Committee on Financial Services voted 34-26 in favor of issuing a report recommending that the bill be considered further before the full House of Representatives.
To achieve its aim of creating hope and opportunity for investors, consumers and entrepreneurs, the bill relies on these key principles, as summarized:
- Taxpayer bailouts of financial institutions must end and no company can remain too big to fail;
- Both Wall Street and Washington must be held accountable;
- Simplicity must replace complexity, because complexity can be gamed by the well-connected and abused by the Washington powerful;
- Economic growth must be revitalized through competitive, transparent, and innovative capital markets;
- Every American regardless of their circumstances, must have the opportunity to achieve financial independence;
- Consumers must be vigorously protected from fraud and deception as well as the loss of economic liberty; and
- Systemic risk must be managed in a market with profit and loss.
How Will It Affect the Mortgage Industry?
For starters, the bill seeks to revamp the Consumer Financial Protection Bureau that issues and enforces compliance of lenders on rules, e.g. Qualified Mortgages and takes action on related complaints and abuses, among other things.
Under the bill, the CFPB will be renamed as Consumer Law Enforcement Agency. It will be given a dual mission of (1) consumer protection and (2) competitive markets.
However, the CFPB will be stripped of its market-monitoring function as well as supervisory function and will have a Director who is removable by the President at will. It will also be subjected to Congressional oversight.
It can be recalled that the current administration has challenged the CFPB over its structure and wishes to remove the current Director, Richard Cordray.
Moreover, the Financial CHOICE Act incorporates amendments to the Truth in Lending Act (TILA) as it relates to:
- The definition of high-cost mortgage
- The definition of points and fees
- Safe harbor for (i) creditors that are depository institutions and (ii) mortgage originators for certain loans held on portfolio, as set forth in the Portfolio Lending and Mortgage Access Act.
For HR 10 to be enacted into law, it must pass House and Senate approval in identical form and signed by the President.
Justin McHood is a managing partner at Suited Connector and has been recognized by national media outlets as a financial expert for more than a decade.
