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Community Bank Relief from Dodd Frank and TILA

Author: Barry Johnson

Congress has acted – SB 2155 has passed the House and Senate and will shortly be law. Several earlier blog entries discuss HB 2226 and SB 2155. Each of these bills provides important community banking relief measures.

On Tuesday May 22, the House – along a largely party line vote – approved SB 2155. The bill will now be sent to the President for signature. Much of the press about this bill relates to the roll back of the “too big to fail” regulations. And this does, indeed, deserve attention.

But the bill also provides relief to community banks in the form of a new “Qualified Mortgage” under the Truth in Lending Act. My prior blog post about SB 2155 provides more details and can be viewed here. Never the less the bottom line is this: a bank that makes a loan to a consumer and holds that loan in the bank’s portfolio will now be making a “Qualified Mortgage” loan under TILA.

TILA requires consumer mortgage loans to be underwritten in light of the consumer’s “ability to repay”. And Regulation Z (TILA) now has a set of complex ability to repay (ATR) regulations. TILA now allows consumers to sue lenders if the consumer believes that the lender did not follow the ATR regulations. Lenders were given a “safe harbor” – if they originated something called a “Qualified Mortgage” in compliance with the ATR regulations, then the consumer could not sue.

Now, a community bank with less than $10 billion in total assets can originate a new form of “Qualified Mortgage” – a so-called “Portfolio QM”. These Portfolio QMs will allow community banks to offer a greater variety of mortgage products than allowed by a standard Qualified Mortgage.

The Portfolio QM product will take some time to develop. Once the President signs the law, the CFPB will need to amend Regulation Z writing the detailed rules for this product. We will keep you up to date on these regulations as they develop, and as always, if you have questions about this blog post please call or email me at