Community Bankers Association of Illinois

FEDERAL ACTION UPDATE: November 16, 2007

U.S. House Passes Mortgage Reform; Dodd Declares on ILC's; Senate Debates Farm Bill

On a bipartisan vote, the U.S. House passed a sweeping mortgage industry reform bill last night (November 15, 2007) that would set certain loan underwriting standards into federal law. House Financial Services Committee Chairman Barney Frank (D-Mass.), a principal author of the Mortgage Reform and Anti-Predatory Lending Act ( H.R. 3915), said during floor debate that the legislation was expressly written so as not to deter community banks from originating mortgages. H.R. 3915 includes an ICBA-sought provision that would allow bank regulators to minimize regulatory burdens on community bank lending operations.

H.R. 3915 would establish a licensing and registration system for all mortgage originators (bank employees would be subject to registration only) and subject them to federal "duty of care" requirements when dealing with borrowers. The bill would set minimum standards for mortgages to show borrowers have a reasonable ability to repay and receive net tangible benefits from a loan and would define "qualified mortgages" and "qualified safe harbor mortgages" that are presumed to meet the minimum standards. It would also limit incentive compensation for mortgages outside the safe harbors. Although no comparable legislation to H.R. 3915 has been introduced in the Senate, Senate Banking Committee Chairman Chris Dodd (D-Conn.) has released a conceptual outline of a mortgage reform bill that will guide the development of the Senate bill. Read ICBA Release

In other news, Chairman Dodd has recently stated plans to release a draft of legislation that would address the controversial industrial loan company loophole, American Banker reported. Dodd told the newspaper that he continues to work on a legislative proposal with other senators, including the committee's ranking member, Sen. Richard Shelby (R-Ala.). Dodd said he hoped to release the draft legislation for senators to consider over the congressional Thanksgiving recess, with action taking place on the ICBA/CBAI-priority issue soon after. The House has already overwhelmingly cleared ICBA/CBAI backed legislation to close the ILC loophole.

CBAI, ICBA and its members remain hopeful that Congress will act to preserve the separation of banking and commerce before an FDIC moratorium expires Jan. 31. The moratorium is blocking applications for deposit insurance by commercial firms that would own industrial loan companies.

Finally, FCS continues to attempt to amend the 2007 Farm Bill in the U.S. Senate. Despite losing a floor vote in the U.S. House, FCS is still trying to amend the farm bill to attempt to enhance or increase their lending powers. Majority Leader Harry Reid (D-NV) made a motion to limit the number of amendments and debate on the bill, however, that attempt failed. Both sides are now negotiating to see how many amendments, etc. will be presented. It is still unclear whether or not the pro-FCS amendment ("Chambliss amendment") is going to make the "cut". CBAI will continue to update the membership as the issue develops. Contact CBAI's Department of Governmental Relations at 217/529-2265 with any question or concerns regarding this update.

  800.736.2224 (IL) | 217.529.2265  
  DISCLAIMER: The association is not responsible for and has no control over the subject matter, content, information, or graphics when viewing links attached to this association's site.