After much back and forth between the U.S. House of Representatives and Senate over an extended period of time, both chambers have passed major housing legislation entitled “21st Century ROAD to Housing Act.
Although initially a ceremony in which President Trump would sign the Act into law was scheduled for June 24, 2026, the ceremony was canceled with President Trump apparently tying his willingness to sign the legislation to the Senate passing the Save America Act, which includes various provisions regarding federal elections. Although the law in this area has been subject to differing interpretations, it appears that under Clause 2 of Section 7 of Article I of the Constitution, if President Trump does not sign the legislation within 10 days of it being presented to him (excluding Sundays but not federal holidays), and if Congress does not adjourn sine die in the interim, then the bill automatically becomes law. It appears that the 10-day period will end on July 4. Should the President veto the legislation, potentially Congress could override the veto because it passed the House by a vote of 358-32 and the Senate by a vote of 85-5, with both totals exceeding the vote necessary to override a Presidential veto.
The Act includes provisions that focus on small-dollar mortgage loans.
FHA Small Dollar Loan Pilot Program
The Act provides that not later than one year after enactment, the U.S. Department of Housing and Urban Development (HUD) “may establish a pilot program to increase access to small-dollar mortgages for mortgagors” in connection with Federal Housing Administration (FHA) insured mortgage loans. For purposes of the pilot program, a “small-dollar mortgage loan” is defined as a mortgage that (1) has an original principal balance of $100,000 or less and (2) is secured by a one- to four-unit property that is the principal residence of the mortgagor.
The pilot program may include:
• The authorization of direct payments to lenders to incentivize the origination of small-dollar mortgages.
• The adjustment of terms and costs imposed by FHA with respect to small-dollar mortgages.
• The provision of direct grants for mortgagors who obtain small-dollar mortgages to cover costs associated with:
• Down payments.
• Closing costs.
• Appraisals.
• Title insurance.
• The conducting of outreach to potential mortgagors about the availability of small-dollar mortgages.
• The provision of technical assistance for lenders that originate small-dollar mortgages.
The pilot program would sunset four years after it is initiated. Further, the authority of HUD and FHA to establish a pilot program to increase access to small-dollar mortgages for mortgagors would expire three years after the enactment of the Act.
Beginning not later than one year after the establishment of the pilot program and ending one year after the sunset of the program, FHA must submit to Congress an annual report that must include specified information to help provide for an analysis of the program.
Loan Originator Compensation
The Act includes provisions focusing on whether changes to the Regulation Z loan originator compensation rule under the Truth in Lending Act (TILA) would be appropriate to incentivize loan originators to originate small-dollar mortgage loans. For purposes of the provisions, a “small-dollar mortgage loan” is defined as a mortgage loan having an original principal obligation of not more than $100,000 that is (1) secured by real property designed for the occupancy of between one and four families, and (2) (a) insured by FHA under Title II of the National Housing Act, (b) made, guaranteed or insured by the Department of Veterans Affairs or the Department of Agriculture, or (c) eligible to be purchased or securitized by Fannie Mae or Freddie Mac.
Not later than 270 days after enactment, the CFPB must submit a report to House and Senate committees on loan originator compensation practices throughout the residential mortgage market, including the relative frequency of loan originators being compensated:
• With a salary.
• With a commission reflecting a fixed percentage of the amount of credit extended. (The loan originator compensation rule expressly authorizes the payment of a commission that is a fixed percentage of the loan amount.)
• With a commission based on a factor other than a fixed percentage of the amount of credit extended.
• With a combination of salary and commission.
• On a loan volume basis.
• With a commission reflecting a percentage of the amount of credit extended, for which a minimum or maximum compensation amount is set. (The loan originator compensation rule expressly authorizes the payment of a commission that is a fixed percentage of the loan amount, subject to an optional fixed minimum and/or maximum dollar compensation amount.)
The report must include (1) data and other analyses regarding the effect of the approaches to loan originator compensation described above on the availability of small-dollar mortgage loans, and (2) an analysis and a discussion regarding potential barriers to small-dollar mortgage lending.
In connection with producing the report, the Act provides that “the Secretary shall, in coordination with relevant Federal agencies that regulate federally backed small-dollar mortgages and in consultation with the Director of the Community Development Financial Institutions Fund established under section 104 of the Community Development Banking and Financial Institutions Act of 1994 (12 U.S.C. 4703), give due consideration to the practices for compensating loan originators that are employed by or originate loans on behalf of community development financial institutions.” Presumably, the reference to “the Secretary” is intended to be a reference to the CFPB Director.
A prior version of the legislation passed by the Senate provided that after issuing the report, the CFPB could issue regulations to clarify the forms of compensation a lender may use to compensate a loan originator that are permissible under TILA “and would result in the loan originator receiving compensation for originating a small dollar mortgage that is not less than the compensation the loan originator would receive for originating a mortgage loan that is not a small dollar mortgage.” The Act does not provide for such CFPB rulemaking. Of course, the CFPB on its own could engage in rulemaking within the boundaries of TILA.
Ability-to-Repay Rule/Qualified Mortgage Loan Points and Fees Limitations
The Act includes provisions focusing on whether the Regulation Z ability-to-repay rule under TILA may impact the origination of small-dollar mortgage loans. For purposes of the provisions, a “small-dollar mortgage” is a mortgage with an original principal balance of less than $100,000.
The qualified mortgage provisions under the rule, which provide for a safe harbor or rebuttable presumption of compliance with the rule based on the loan pricing, impose a limitation on the points and fees that a lender may charge, with the limitation varying based on the loan amount. Specifically, for 2026 the points and fees limits are as follows:
• For a loan amount greater than or equal to:
• $ 137,958, 3% of the total loan amount (the total loan amount is the actual loan amount subject to certain adjustments).
• $82,775 but less than $ 137,958, $4,139.
• $27,592 but less than $82,775, 5% of the total loan amount.
• $17,245 but less than $27,592, $1,380.
• For a loan amount less than $ 17,245, 8% of the total loan amount.
The Act provides that not later than 270 days after the date of enactment the CFPB, in consultation with HUD and the Federal Housing Finance Agency, must evaluate the impact of the points and fees limitations on small-dollar mortgage originations.
A prior version of the legislation passed by the Senate provided that after the evaluation, the CFPB could initiate rulemaking to amend the points and fees limitations to encourage additional lending for small-dollar mortgages. The Act does not provide for such CFPB rulemaking. Of course, the CFPB on its own could engage in rulemaking within the boundaries of TILA.