Congress Passes Sherman Bill to Support Non-Profit Provided Affordable Housing
Congress passed the Building Up Independent Lives and Dreams Act or “BUILD” Act, legislation led by Congressman Brad Sherman (D-Sherman Oaks), Congressman Barry Loudermilk (R-GA), Senator Deb Fischer (R-NE) and Senator Chris Van Hollen (D-MD). The passage of this legislation represents a significant step towards helping nonprofits like Habitat for Humanity help struggling families access housing through zero percent interest mortgages.
“We’ve heard of different local Habitat for Humanity chapters who make more than 5 loans a year having difficulty complying with the mandatory TILA-RESPA Integrated Disclosure form, citing increased costs and complexity. The BUILD Act is a straightforward way to address these challenges with a narrow regulatory tweak that will ensure non-profits can focus on working in their communities to build homes, rather than sitting in an office,” said Congressman Sherman.
Following the 2008 mortgage crisis, Congress established the Consumer Financial Protection Bureau (CFPB) to create rules of the road to protect consumers against the predatory mortgage lending practices which contributed to the crisis. To protect borrowers from being unknowingly pushed into mortgages they cannot afford, the CFPB established the TILA-RESPA integrated disclosure (TRID), also known as the “know before you owe” disclosure. TRID requires that, prior to a mortgage signing, lenders must provide borrowers with a simplified disclosure detailing all of mortgage costs the borrower will owe. The TRID forms include a loan estimate and closing disclosure, designed to allow consumers to easily identify high-cost mortgages such as those with ballooning interest rates.
However, these disclosures are often not relevant to mortgages made by charitable organizations, like Habitat for Humanity, which provide low- or no-fee zero percent interest mortgages. Habitat provides homeownership opportunities to low-income families by building homes that are financed with a zero percent interest loans, or other affordable mortgage loan products. Small and mid-sized Habitat for Humanity chapters have experienced challenges in complying with TRID requirements because of the cost of the necessary software to complete these forms and training required to use the software.
The BUILD Act will address this issue by providing a narrow exemption from TRID requirements for legitimate nonprofits making low-cost zero interest mortgages. Rather than provide the loan estimate and closing disclosure forms, these nonprofits will have the option to instead use the three forms that were previously acceptable, the Truth in Lending form, the Good Faith Estimate, and the HUD-1 form. The same exemption is currently available for all organizations making five or fewer mortgage loans per year, and the BUILD Act would simply expand this exemption to include these nonprofits.