Congress offers relief from financial regulations – Part 2

 Regulations  Comments Off on Congress offers relief from financial regulations – Part 2
Jun 232017
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Yesterday, we reviewed how the Financial Choice Act, recently passed by the House, would affect banking regulations. Today, we’re going to look at how it would change the Consumer Financial Protection Bureau.

The bill would have three major effects:

– It would change the name of the bureau to the Consumer Law Enforcement Agency and change its mission to enforcing existing consumer financial regulations rather than creating new ones. In this sense, it would function more like other independent federal agencies.

– It would allow Congressional oversight through the appropriations process.

– It would change the leadership from a single, unaccountable director to one who serves at the pleasure of the President.

Democrats seem most exercised about this provision as they view the current untouchable director as a way to maintain their preferred regulatory scheme across presidential administrations.

As I said yesterday, the bill’s fate in the Senate seems dim, but three additional developments offer hope to those favoring change:

– A Congressional Budget Office analysis indicates the Choice Act will reduce the deficit by $33 billion, which makes it possible Republicans could use the reconciliation process to pass reforms with only 51 Senate votes.

– Second, the courts seem poised to decide that the CFPB current structure is unconstitutional, but the final decision still may be a couple years away.

– Finally, it seems likely the CFPB’s current director will resign to run for governor of OH, which would allow President Trump to appoint a reformer to the position.

Congress offers relief from financial regulations – Part 1

 Regulations  Comments Off on Congress offers relief from financial regulations – Part 1
Jun 222017
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

President Trump came to office promising to cut regulations that are stifling job growth, and one of his top targets was the Obama-era Dodd-Frank Act that put tough regulations on consumer lending and created the Consumer Financial Protection Bureau (CFPB).

Congressional Republicans recently offered an assist by passing the Financial Choice Act that repeals major aspects of Dodd-Frank. Based on a Congressional Budget Office analysis, the bill offers regulatory relief to community banks and credit unions in exchange for greater capitalization, which should make them safer. Larger banks are unlikely to meet the capital requirements needed for relief.

Large banks do like provisions of the bill that would streamline and reduce the frequency of exams and that would repeal the Volker Rule. The bill also would classify some loans banks hold in portfolio as “qualified mortgages,” which could loosen up bank lending a bit.

Democrats unanimously oppose the bill, but most of their statements so far have been fear-mongering claims that the bill’s passage will lead to another financial crisis. Given the opposition, the bill’s prospects in the Senate are dim for now. Senate Banking Comm Chair Crapo said the Choice Act is a good starting point, but he will craft his own bill with input from Senate Democrats. However, those favoring major change can be cheered by the fact that the Choice Act stakes out a very strong starting point.

Tomorrow, we’ll dig into how the bill changes the Consumer Financial Protection Bureau.

Oh, no! Trump dismantling consumer protection

 Regulations  Comments Off on Oh, no! Trump dismantling consumer protection
Feb 202017
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Despite the hysterical headlines that President Trump was dismantling consumer financial protections by executive order, the truth is much less exciting.

Trump has called Dodd-Frank, the recession-era law that created the current regulatory structure, a disaster and pledged major reforms. Earlier this month, he ordered his financial team to review the law and develop a plan to overhaul it. This starts a likely many-month process to modify Dodd-Frank and other financial regulations that are stifling lending and driving community banks out of business.

While Trump conceivably could rewrite or reverse some financial regulations once his appointees take charge at various federal agencies, he cannot change statutory rules, such as those enacted through Dodd-Frank, without Congressional action.

Unfortunately for those hoping for quick action, that appears unlikely. While the House already is moving legislation to rewrite the law, Senate Republicans need help from Democrats. Senate Banking Comm Chair Mike Crapo says, “The climate right now in the Senate is as toxic as I’ve ever seen it.” Crapo hopes he can get some Democratic support for changes that will promote lending by easing rules for smaller and community banks.

The eventual changes could be significant, but the pace of change will allow for serious consideration and certainty doesn’t justify the silly headlines.

The possibility of better flood insurance

 Regulations, Residential Mortgage  Comments Off on The possibility of better flood insurance
Jun 062016
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Congress is diddling with flood insurance again, and if you’re in a flood zone, you may want to pay attention. The House passed a bill about a month ago that would authorize state insurance commissioners to approve flood insurance policies that would be accepted for conventional and government mortgage loans. This means you would have a private insurance alternative to the National Flood Insurance Program (NFIP), which for many is currently the only game in town.

Obviously, the idea is that more competition will lead to more consumer choice. Consumers will be able to shop for an insurance product that meets their particular needs rather than be stuck with the current one-size-fits-all government product.

One interesting twist in the bill is that it would allow homeowners who switch to private insurance to switch back to the NFIP if they aren’t satisfied. Their NFIP insurance rate wouldn’t change as long as they don’t allow coverage to lapse.

The Senate is considering a similar bill that has bipartisan support, so it’s quite possible private flood insurance will become a reality this year.

Congress proposes easing flood insurance rate hikes

 Regulations, Residential Mortgage  Comments Off on Congress proposes easing flood insurance rate hikes
Aug 022015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The House of Rep is considering the Flood Insurance Fairness Act of 2015, which expands on last year’s changes to the flood insurance program by providing rate relief for second homes and rental properties. The intent is to allow these homes to receive the same flood insurance premiums as primary residences. While those who experienced the rate shock last year are probably cheering, I question whether this puts the solvency of the program at risk again. The House has a companion bill, the Flood Insurance Market Parity and Modernization Act, which is supposed to address the solvency issue. I’ll update you as I hear more about how these bills will affect both the program and premiums.

Regardless of the outcome of this legislation, one important change to the program already is in effect. Outbuildings that lie in the flood plain no longer result in a flood zone designation for the entire property. The outbuilding must be detached from the primary residential structure and cannot serve a residential purpose, such as sleeping, bathroom, or kitchen facilities.

Senate considers tax on homeownership

 Residential Mortgage  Comments Off on Senate considers tax on homeownership
Jul 292015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

This really gets my knickers in a knot. The Senate is again considering using fees on Fannie Mae and Freddie Mac mortgages, which represent the majority of market, to fund its spending plans. The Guarantee Fee or “g-fee” is charged by Fannie and Freddie to compensate it for the risk associated with guaranteeing a mortgage. In 2011, Congress raised the fee by 10 basis points to pay for a payroll tax break. This time, the Senate wants to extend the fee hike for 4 more years to help pay for transportation funding.

This is an easy move by the Senate because homebuyers generally are unaware of this special tax. There isn’t a “g-fee” line on the closing statement. Instead, the fee is reflected in the interest rate. What the homebuyer sees is a slightly higher rate or slightly higher closing costs. Either way, it acts as a tax for as long as the homebuyer owns the home.

So far, the House is pushing for a temporary extension of existing transportation funding and hasn’t agreed to the Senate’s fee increase. However, given the invisibility of the tax, it wouldn’t surprise me to see the House go along.

Bill to remove medical collections will help homebuyers

 Credit Scoring  Comments Off on Bill to remove medical collections will help homebuyers
Jun 032015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Congress is considering a bill, the Medical Debt Relief Act, that could be a boon to thousands of homebuyers. The bill would require credit bureaus to remove medical debt from a person’s credit report within 45 days of the debt being settled or paid.

The legislation addresses a breakdown in our health insurance system that allows creditors to ding patient’s credit reports when a medical claim isn’t handled correctly or in a timely manner. Patients are responsible for what insurance doesn’t pay, and I’ve seen many cases where patients didn’t realize there was a residual balance on a bill. Medical providers understandably want to get paid, and their recourse is to file a collection action. Unfortunately for the patient, this action could ruin an otherwise pristine credit score and result in thousands of dollars of extra interest when they apply for a loan.

Congress has tried to pass similar legislation a number of times in the past, so passage isn’t guaranteed. However, numerous consumer and industry groups have endorsed this bipartisan bill, which may give it a chance this time.