MBA Advocacy Update Apr. 12, 2021

Bill Killmer bkillmer@mba.org; Pete Mills pmills@mba.org.

On Friday, the Biden administration released the top-line framework for the President’s Fiscal Year 2022 budget proposal. On Monday, MBA sent a letter to the CFPB in response to its proposal to delay the mandatory compliance date for the new General QM rule. And this week, MBA President and CEO Bob Broeksmit, CMB, penned an op-ed highlighting the industry’s efforts during the COVID-19 pandemic. 

1. Biden Administration Releases FY 22 “Skinny Budget” 

On Friday, the Biden administration released the top-line framework for the President’s Fiscal Year 2022 budget proposal. As is typical in a Presidential transition year, the administration has submitted a “skinny budget” — a broad outline of the new administration’s budget priorities provided in time for the start of the Congressional budget process. The FY22 request includes key investments in K-12 education, medical research, climate change, housing, civil rights and other priorities that have been a consistent part of the Biden-Harris agenda since January.

On housing, the budget requests significant increases in funding for housing vouchers, homeless assistance grants, energy retrofitting for public housing and expanded support for Community Development Financial Institutions. The proposal also cites support for the Federal Housing Administration as a crucial source of mortgage financing for first-time and minority homebuyers. It promotes FHA’s role in providing urgent relief through expanded and streamlined loss mitigation programs to homeowners experiencing COVID-19-related hardships. Finally, a significant increase in funding is requested for fair housing enforcement organizations and investment in HUD staff and operations’ capacity to support President Biden’s fair housing executive order. The overall HUD Budget requests nearly $69 billion in funding, $9 billion more than the current year — a 15% increase.  

• Why it matters: The President’s budget proposal is a blueprint of the administration’s priorities provided to Congress as it begins its budget and appropriations’ process. 
• What’s next: The Congressional budget process begins shortly, starting with efforts to pass a budget resolution, and then followed by work on 13 different appropriations bills. Later this year, the Biden administration can be expected to provide a more detailed budget request outlining specific policy priorities. 

For more information, please contact Pete Mills at (202) 557-2878 or Bill Killmer at (202) 557-2736. 

2. CFPB Releases Notice of Proposed Rulemaking Amending Reg X

On Monday, the Consumer Financial Protection Bureau released a notice of proposed rulemaking for industry comment. The NPRM looks to establish a temporary COVID-19 emergency pre-foreclosure review period for a borrower’s principal residence, expiring on December 31. The NPRM would also allow servicers to offer loss mitigation options to borrowers without a complete application as long as specific qualifications are met and clarify reasonable diligence requirements. Comments are due by May 10.

• Why it matters: The NPRM effectively extends the foreclosure and eviction moratorium beyond the June 30, date set by the FHA, U.S. Department of Veterans Affairs, U.S. Department of Agriculture and the GSEs. Although not included in the proposed rule text, the preamble asks for stakeholder views on the need for exceptions to the moratorium for abandoned properties, for borrowers who have been fully evaluated, but do not qualify, for a foreclosure alternative, as well as in situations where a borrower does not respond to servicer outreach.
• What’s next: The MBA Loan Administration Committee will be holding weekly calls to gather member feedback. If you are not on the Loan Administration Committee and would like to join the call, please contact Darnell Peterson at (202) 557-2922.

For more information, please contact Sara Singhas at (202) 557-2826.

3. MBA Responds to CFPB’s Proposed Rule to Delay the Mandatory Compliance Date for General QM Final Rule

On Monday, MBA filed comments opposing the CFPB’s proposed rule seeking to delay the mandatory compliance date of the General Qualified Mortgage final rule. MBA’s comments express strong support for the price-based QM standard, which, compared to the alternatives considered by the Bureau, strikes the best balance between ensuring consumers’ ability to repay and providing broad access to responsible, affordable mortgage credit. As MBA’s comments explain, delaying the mandatory compliance date would not meaningfully expand access to QM loans beyond what would be available under the new General QM rule (i.e., the price-based QM standard). This fact undermines the Bureau’s justification for pursuing a delay.

• Why it matters: The proposed rule has caused unnecessary uncertainty by making it unclear how long the price-based QM will remain in effect and, if it is replaced, what alternative the Bureau ultimately will adopt. In addition, the proposal to extend the GSE Patch has also created confusion, given the GSEs themselves will only purchase loans pursuant to the recently finalized General QM definition, which no longer includes the GSE Patch (see item below for more detail). 
• What’s next: MBA will continue to work with a broad coalition of stakeholders to preserve the price-based QM standard, even if the Bureau chooses to extend the mandatory effective date. 

For more information, please contact Justin Wiseman at (202) 557-2854, Lucia Jacangelo at (202) 557-2941, or Blake Chavis  at (202) 557-2930.

4. GSEs Announce Policy Changes to Comply with Updated QM Framework 

Last week, Fannie Mae and Freddie Mac introduced policy changes in response to provisions in the newly amended Senior Preferred Stock Purchase Agreements (PSPAs) requiring them to purchase loans that meet the revised QM standard. The amended PSPAs require each GSE to establish a program on or before July 1, to ensure that loans they purchase meet the new General QM criteria, notably the new QM threshold that a loan’s annual percentage rate be no more than 225 basis points above the average prime offer rate, subject to limited exceptions. The Fannie Mae Lender Letter and Freddie Mac Bulletin clarify that loans with application dates beginning on or after July 1 must satisfy the new QM General Definition in order to be eligible for purchase by the GSEs. Loans originated under the GSE Patch must have application dates no later than June 30, and must be delivered by August 31.

• Why it matters: While the PSPA amendments stated the GSEs no longer would be permitted to rely on the GSE Patch, there was some confusion surrounding the effective date of this policy shift. These announcements clarify the compliance dates and give lenders, vendors and other market participants more time to make the necessary system changes.
• What’s next: Both GSEs will release additional details regarding these policy changes in future publications, and they plan to continue their assessment of the impacts of the PSPA amendments and the revised QM rule on their policies and operations. MBA will continue to provide resources to help members understand the new requirements in the coming weeks. 

For more information, please contact Sasha Hewlett at (202) 557-2805.

5. MBA Continues to Urge Treasury, FHFA to Allow Flexibility in GSE Purchase Caps

Over the past several weeks, MBA has continued its efforts to address market disruptions caused by the new limits placed on Fannie Mae and Freddie Mac through the Senior Preferred Stock Purchase Agreements. MBA has focused on the 7% limit on GSE acquisitions of loans secured by second homes and investor properties.

Following a letter sent to U.S. Treasury and the Federal Housing Finance Agency highlighting key concerns, MBA staff held meetings with several senior officials to further discuss these concerns as well as propose possible solutions to prevent market disruptions, such as the use of a longer runway for the GSEs to become compliant with the caps. A more flexible approach and timeline would allow the GSEs to make necessary adjustments to their automated underwriting systems, which would alleviate concerns about existing loan pipelines and make lender-specific caps less necessary. Gradual changes also would provide time for private capital alternatives to develop the operational capacity to serve these market segments.

• Why it matters: The immediate implementation of these product caps significantly impacts existing lender pipelines and is creating major disruptions in the market.
• What’s next: MBA will continue to advocate with senior leadership at FHFA, Treasury and the GSEs to find a solution to the short-term implementation issues and will continue to urge re-evaluation of the various product limits, as well as the cash window limits that take effect in January 2022.

For more information, please contact Sasha Hewlett at (202) 557-2805.

6. Industry Opposition Blocks New York State Mezzanine Debt Tax Proposal

Last week, New York legislative leaders and Gov. Andrew Cuomo (D) announced agreement on a $212 billion budget for the state’s new fiscal year, which began on April 1. Importantly, though the new fiscal plan includes numerous tax increases, a potential new tax on mezzanine debt and preferred equity investments was dropped from the final budget. The Governor had not included this tax in his proposed state budget released in January, but both the New York Assembly and Senate added it to their respective budget bills released just a few weeks ago. In response, MBA led a broad coalition of national, state, and local groups in opposing it, which included a coalition letter to state leaders and a Mortgage Action Alliance Call to Action.

• Why it matters: The tax would have substantially increased the cost of mezzanine debt or preferred equity financing in New York.
• What’s next: Separate legislation is still active on this issue and the New York Legislature will continue to meet through June. MBA will remain engaged with our members in New York and its coalition partners.

For more information, please contact William Kooper at (202) 557-2737 or Grant Carlson at (202) 557-2765.

7. MBA-Supported LIBOR Transition Legislation Enacted in New York and New Mexico

Last week, New York Gov. Cuomo (D) approved  Assembly Bill 164-B to facilitate the transition away from the London Interbank Offered Rate. Most tenors of U.S. Dollar LIBOR will expire on June 30, 2023, and this law will transition any contracts, including adjustable-rate mortgages, without robust fallback options to a recommended index – likely the Secured Overnight Financing Rate. MBA and the New York MBA sent a letter in February to the bill’s Assembly and Senate sponsors supporting the bill and urging enactment. The law also provides legal safe harbors in certain situations when contracts are transitioned from LIBOR to the recommended index. Similar legislation was introduced during the previous Congress, and New York’s action is viewed as helpful in providing certainty should Congress not pass a bill before the discontinuation of LIBOR.

Also this week, New Mexico Gov. Michelle Lujan Grisham (D) approved Senate Bill-365, a bill supported by the New Mexico Mortgage Lenders Association, MBA and the Mortgage Action Alliance to address an unintended consequence of the transition from LIBOR to SOFR. When the GSEs transitioned last year from LIBOR-indexed loans to SOFR, they also changed the interest rate reset from annual to twice per year. Grisham’s action fixes a provision in state law that prohibited a state-chartered mortgage lender, whether a bank or a nonbank, from originating an ARM that resets more than once every 12 months.

• Why it matters: MBA has been actively engaged in the official efforts to transition the mortgage market away from LIBOR. MBA advocacy has focused on minimizing the potential for market disruption as well as litigation risk for market participants.
• What’s next: MBA will continue to keep members informed of all LIBOR transition developments, including next week’s House subcommittee hearing on LIBOR transition issues.

For more information, please contact William Kooper at (202) 557-2737 or Dan Fichtler at (202) 557-2780.

8. MBA-Supported Remote Work Legislation Enacted in Washington, Arkansas

Last week, Arkansas Gov. Asa Hutchinson (R) and Washington Gov. Jay Inslee (D) each signed legislation to make permanent remote work flexibilities in their states for licensed mortgage loan originators. The new Arkansas law provides authority to the Commissioner of the Arkansas Securities Department to promulgate rules under which an MLO may conduct mortgage loan activity or business from a location that is not licensed as a principal place of business or branch office.

The Washington law provides authority to licensed companies to allow MLOs to work from their residences without the company licensing the residence as a branch office of the company.

• Why it matters: Arkansas and Washington joined Maryland in acting on this critical industry advocacy priority to make permanent certain licensing flexibilities put in place during the pandemic.
• What’s next: MBA will continue to pursue changes to state law to promote licensing flexibility consistent with its model bill, which is available along with other campaign materials at www.mba.org/licensingflexibility.

For more information, please contact William Kooper at (202) 557-2737 or Kobie Pruitt at (202) 557-2870.

9. MBA-Supported RON Legislation Enacted in New Mexico

Earlier this week, New Mexico Gov. Michelle Lujan Grisham (D) signed Senate Bill 12 , making New Mexico the 31st state to adopt Remote Online Notarization legislation consistent with the minimum standards necessary for safe and secure real estate finance transactions. To support the legislation, MAA issued a Call to Action and the New Mexico Mortgage Lenders Association and MBA sent a letter to Grisham urging her expeditious approval once the bill was passed.

• Why it matters: With SB-12, New Mexico adopts the non-partisan Uniform Law Commission’s Revised Uniform Law on Notarial Acts (RULONA), which is consistent with MBA’s model state RON legislation, available here.
• What’s next: MBA will continue to work to enact RON laws in all remaining states as well a federal RON law.

For more information, please contact William Kooper at (202) 557-2737 or Kobie Pruitt at (202) 557-2870.

10. Sign Up for Sixth Annual MAA Action Week 

The Mortgage Action Alliance, MBA’s free grassroots advocacy network, will hold its sixth annual Action Week, May 3-14, 2021. Action Week is a national, industrywide campaign aimed at growing MAA and activating real estate finance professionals in key states and congressional districts. MAA has over 71,000 active members nationwide in an industry of over 330,000 employees.  

• Why it matters: In 2020, total MAA membership tripled and resulted in critical legislative and regulatory policy wins at the federal and state levels. Collectively, MAA members sent over 150,000 emails to elected officials supporting Calls to Action to protect and secure our industry amid the pandemic.
• What’s next: MBA’s goal is to grow and sustain MAA’s membership to 75,000 members.

Complete this form to join more than 50 participating companies and receive further information. For more information, please contact Rosie Sheehan at (202) 557-2933.

11. Register Today: MBA National Advocacy Conference – May 11-12

Registration is now open for the MBA National Advocacy Conference, May 11-12. NAC allows you to connect directly with elected officials online from your home or office.

• Why it matters: NAC will provide a great opportunity for our industry to advocate for reasonable changes to the regulations and laws that are increasing costs or preventing you from doing business.
• What’s next: Share your experiences, your voice, and your passion for our industry May 11-12! Register today at mba.org/nac and take advantage of the $99 early bird rate.

For more information, please contact Alden Knowlton at (202) 557-2816.

12. Register Today: MBA Spring Conference & Expo 2021 – April 20-22 

MBA’s Spring Conference & Expo 2021, taking place via MBA Live, will feature several must-see sessions, including remarks from HUD Secretary Marcia Fudge and FHFA Director Mark Calabria and other prominent Washington policymakers and stakeholders. 

• Why it matters: MBA President and CEO Bob Broeksmit, CMB, will share an update on MBA’s work in Washington, and then interview Fudge. Director will discuss the various policy issues at FHFA.
• What’s next: To register for the conference, click here. 

For more information, please contact Dawn Williams at (202) 557-2877.

13. Upcoming MBA Education Webinars on Critical Industry Issues

MBA Education continues to deliver timely  programming that covers the spectrum of challenges, obstacles and solutions pertaining to our industry. Below, please see a list of upcoming webinars – which are complimentary to MBA members:

• MAA Quarterly Webinar: April 2021 – April 14
• Key TCPA Compliance Issues – April 15
• Practical Use Cases for Intelligent Automation and RPA in Mortgage Processing – April 15
• Construction Loan Considerations During the COVID-19 Pandemic – April 28
• The 2020 Pandemic and Other Primary Factors of Urban Exodus – May 4
• Key FDCPA Compliance Issues and Considerations – May 18
• Harnessing and Leveraging Data in Today’s CRE Markets – May 18

MBA members can register for any of the above events and view recent webinar recordings by clicking here. For more information, please contact David Upbin at (202) 557-2890.