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62 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST GOVERNMENT House Passes Measure to Increase Financial Equity and Inclusion for All The House of Representatives passed HR 2543 by a vote of 215-207, legislation drafted to promote equity for underserved communities and increase access to safe and affordable financial services for all Americans. T he U.S. House of Representatives has announced the pas- sage of HR 2543, The Financial Services Racial Equity, Inclusion, and Economic Justice Act, by a vote of 215-207. HR 2543 requires important steps to increase equity and inclusion in financial services and sup- port greater economic mobil- ity, through the elimination of disparities, including racial and ethnic, in leveling access to financial services for all. "As we address inflation and work to bring costs down for American families and small busi- nesses, Congress must ensure that Americans aren't losing money as a result of discrimination in lending," House Majority Leader Rep. Steny H. Hoyer said. "The legislation we passed extends the ban on discrimination in lend- ing to include discrimination on the basis of sexual orientation, gender identity, and geography, and it includes provisions aimed at making sure minority-owned businesses and entrepreneurs can access capital fairly and equitably." In its aim to provide fair equity to all, HR 2543 would also prohib- it lending discrimination based on gender identity, sexual orientation, or geography, and establish greater language access requirements for creditors and servicers. "This indeed was history in the making, this legislation will change the lives of millions. Too often we have seen families denied mortgages, loans, and rules by government agencies that were established to ensure fairness and equity in financial services," said Rep. Maxine Waters, Chair of the Committee on Financial Services. "The lack of fairness in lend- ing have prevented communities of color from homeownership, small business development, fair pricing, and protection by the government. As banks close in small towns and cities across this country, low-income communities and communities of color are cut off from access to capital." Rep. Al Green added, "People of color across our nation struggle to access capital and credit every day due to obstacles such as inflated loan rates or loan denials to credit worthy borrowers. These systemic barriers prevent minority communities from buying homes, launching businesses, and building wealth. As of 2020, according to the Census Bureau, the home- ownership rate for Black families was approximately 44% compared to 75% for white families. And in 2021, according to the Federal Reserve, the average Black and Hispanic household held 15-20% of the wealth that a white household held." Key to components to the Financial Services Racial Equity, Inclusion, and Economic Justice Act are two bills two bills, HR 166–Fair Lending for All Act, and HR 2516–Promoting New and Diverse Depository Institutions Act. HR 166 makes it illegal for creditors to discriminate against individuals based on their race, color, religion, national origin, sex (including sexual orientation and gender identity), and other criteria. Under HR 166, lenders who dis- criminate would now be subject to criminal penalties. HR 2516 amends the Dodd- Frank Wall Street Reform and Consumer Protection Act to require federal banking regulators to include a diversity and inclu- sion component in the Uniform Financial Institutions Rating System, and for other purposes. "All of these measures com- bined are a quantum leap in the righteous direction to combat systemic racism and disparities in opportunity," Rep. Green said. "Invidious discrimination in lend- ing and homebuying must end. I thank the honorable Maxine Waters, Chairwoman of the U.S. House Committee on Financial Services for her leadership and resolve to bring the Racial Equity, Inclusion, and Economic Justice Act to the House floor for a suc- cessful vote." 4. Will the Focus on Reducing Closing Costs Survive? Traditionally, first time buyers have the least amount of assets to bring to the table in order to scrounge up a down payment, which is admittedly getting larger due to the rising cost of housing. While down payments can now be as low as 3% through certain GSE programs, closing costs have con- tinued along their path unfettered, a path which could be drawing to an end as the EFH plans from both companies eyed it as a way to lower costs and help increase minority homeownership rates. "The issue is, however, well- known within housing finance circles to be sensitive," Layton said. "The largest sources of clos- ing costs for GSE-funded loans come from title insurers and mortgage insurers, with both in- dustries reputed to earn unusually high profit margins, and believed to have a high degree of political protection due to outsized lobby- ing and other political influencing activities. In fact, the two indus- tries are broadly considered quite effective at influencing Congress in particular, with previous efforts to lower costs for homeowners being largely unsuccessful." "So, the fact that both plans specifically call out the cost of title insurance (and Freddie Mac plans to additionally call out mortgage insurance) acts as a warning shot to those industries that their high mar- gins may be targeted for reduction, at least with respect to EFH-related lending activities," Layton continued. "It remains to be seen whether the title and mortgage insurance indus- tries accept lower margins on such EHF-related loans or, fearing this is the beginning of a broader attack on their high profit margins, move ag- gressively to protect their interests." "I can only wish the FHFA and the two GSEs the best as they embark upon a long-term journey to evolve their just-announced EHF plans, chock full of topics to research and pilots to run, to be- come stable and mature programs with bipartisan support that are hopefully successful at materially reducing racial homeownership gaps," Layton concluded. "This indeed was history in the making, this legislation will change the lives of millions." —Rep. Maxine Waters, Chair of the Committee on Financial Services