Movements in the Regulatory Relief Bill

According to an American Banker article published today, March 15, the Senate passed its Regulatory Relief bill by a vote of 67-31. Cited as a fix to many provisions included in Dodd-Frank, changes in the bill include an increase in the asset-size threshold from $50 billion to $250 billion for Dodd Frank’s “systemically important financial institution” (SIFI) designation, tweaks to the CFPB's "Qualified Mortgage" rule, modifications to the Federal Reserve's stress-testing procedures, as well as a reduction in compliance requirements for financial institutions with less than $10 billion on their balance sheets.

However questions remain, namely regarding the bill's fate in the house after the failure of the CHOICE Act to pass in its original form in the Senate. House Financial Services Committee Chairman Jeb Hensarling (R-TX) has identified 30 bills that have enjoyed bipartisan support that could provide financial institutions with regulatory relief. Others posit that the House may make changes to the Senate's version, pass it, then bring the legislation to conference.

Another amendment included, as reported in an article in the Wall Street Journal on Wednesday, is a proposal to include a requirement for Fannie Mae and Freddie Mac (the GSEs) to consider credit worthiness beyond FICO scores. This comes in the middle of a lengthy review at the Federal Housing Finance Administration concerning the adoption of alternative credit modeling for the GSEs.

Arguments in favor of the amendment maintain that there are a number of factors excluded from FICO's model that may increase a borrower’s ability to procure a loan and a concern amongst some legislators that the FHFA may decide against credit-score competition. On the other hand, detractors have argued that such a move would give credit bureaus undue influence over who procures a loan, as well as the fact that the FHFA has not completed its review.

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