MBA Advocacy Update July 6 2021

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

The CFPB released its final rule amending select requirements of Regulation X to assist borrowers impacted by COVID-19. Also last week, MBA President and CEO Bob Broeksmit, CMB, sent a letter to the leaders of the National Governors Association and CSBS to ask for their assistance in addressing the challenges MBA member companies face as they attempt to reopen their offices. 

1. CFPB Releases Regulation X Final Rule

The Consumer Financial Protection Bureau released its final rule amending select requirements of Regulation X to assist borrowers impacted by the COVID-19 pandemic. The CFPB opted not to implement the pre-foreclosure review period initially proposed in its Notice of Proposed Rulemaking published in April. Instead, the CFPB will implement three temporary special loss-mitigation procedural safeguards, one of which must be met before a servicer can begin the foreclosure process. Additionally, the final rule provides servicers with further guidance regarding reasonable diligence and early intervention requirements.

• Why it matters: The final rule included many of MBA’s recommendations, including the ability to begin foreclosure proceedings for borrowers who do not qualify for home retention options or have not responded to servicer outreach, or who have been reviewed.
• What’s next: The rule will go into effect on August 31, and will sunset on December 31.

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

2. MBA Urges State Mortgage Regulator and Governor Associations to Collaborate on Extending MLO Remote Work Flexibilities

MBA President and CEO Bob Broeksmit, CMB, sent a letter to the leaders of the National Governors Association and Conference of State Bank Supervisors to ask for their assistance in addressing the challenges state-licensed MBA member companies face as they attempt to reopen their offices safely to employees and consumers. The letter urged NGA and CSBS to work together to extend existing emergency workplace flexibilities for licensed mortgage loan originators and others engaged in licensed activity until the end of the year. The letter was also shared with the staff and leadership of the American Association of Residential Mortgage Regulators.

• Why it matters: Several state governors are sunsetting their emergency shelter-in-place requirements, which limit the authority of state mortgage industry regulators to continue their remote work guidance or “no action” policies for licensed staff.
• What’s next: MBA will continue to advocate for the extension of remote work permissions through the end of 2021. Also, MBA will use its model state legislation in partnership with state associations to seek amendments to state statutes that require licensed staff to work from licensed locations.

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

3. House Financial Services Committee Targets Credit Bureau Reforms   

On Tuesday, the House Financial Services Committee held its second hearing of this year focusing on major changes to credit reporting in the United States. The hearing highlighted bipartisan consensus that the credit reporting system is in need of reform, though legislators advocated for widely differing approaches. Democrats proposed the idea of a government-run credit agency, while Republicans preferred options that address what they perceive as flaws in the current system. Included in the hearing were three legislative proposals that would drastically alter the way credit providers and consumers interact with credit bureaus. These proposals would create a public credit reporting option, strengthen oversight of the credit bureaus, and provide more avenues for consumers to remedy alleged credit report errors.

• Why it matters: Since the 2017 Equifax data breach, credit bureaus have come under intense scrutiny from Congress, with HFSC Chairwoman Maxine Waters (D-CA) and other members of the Committee’s majority viewing credit bureau reforms as a necessary step toward racial equity in the financial system. 
• What’s next: This hearing sets the stage for the HFSC to potentially advance these bills through committee and to the House floor in the coming weeks and months.

For more information, please contact Borden Hoskins at (202) 557-2712 or Alden Knowlton at (202) 557-2741.

4. HUD Extends FHA COVID-19-Related Origination Requirements

On Tuesday, HUD extended the Federal Housing Administration’s temporary guidance on verification of self-employment income and rental income, as well as on 203(k) escrow administration. The requirements in this guidance – put in place to mitigate concerns associated with the pandemic – are extended until September 30. These requirements had been set to expire on June 30.

• Why it matters: This extension marks a departure from HUD’s previous congruent extensions of both pandemic-related origination flexibilities (e.g., exterior-only appraisals) and origination requirements. Last week HUD discontinued the flexibilities, citing limited use by lenders.
• What’s next: MBA will continue to work with HUD to develop a fair and efficient transition away from pandemic-related policies.  

For more information, please contact Hanna Pitz at (202) 557-2796.

5. HUD Revises FHA Property and Appraisal Quality Control Review Requirements

On Wednesday, HUD issued a Mortgagee Letter revising the FHA’s guidance on appraisal field reviews and evaluation of property and appraisal documentation, as well as announcing the expiration of the temporary partial waiver of certain single-family quality control requirements. The temporary waiver for QC field reviews was originally issued in June 2020 and was to sunset on June 30.

• Why it matters: HUD’s updated policies expand the documentation review requirements for loans selected for origination and underwriting QC reviews, but also decrease the appraisal field review requirement from 100% of the loans selected for review to 10% of the loans selected – a welcome change given the costs associated with these reviews.
• What’s next: MBA will continue to work with HUD on potential changes to the Single Family Handbook and suggested improvements to the FHA appraisal and QC processes.   

For more information, please contact Hanna Pitz at (202) 557-2796.

6. VA Issues Guidance on Variety of Pandemic-Related Policies

On Tuesday, the Department of Veterans Affairs issued a circular outlining an array of pandemic-related policies and reminders with respect to income verification, income analysis, eMortgages/eNotes, lien filing and timely remittance of the Funding Fee. The guidance is effective immediately.

• Why it matters: The policies outlined contain key features that may be helpful to lenders.
• What’s next: MBA will continue to work with VA to develop common-sense policies to mitigate impacts of the COVID-19 pandemic and its aftermath.

For more information, please contact Hanna Pitz at (202) 557-2796.

7. Ginnie Mae Announces Custom Pool for 40-Year Loan Modifications

Late last week, Ginnie Mae announced a new pooling option for 40-year loan modifications. The new pool of type C-ET will be a custom pool, having a minimum pool size of a single loan and $25,000. Eligible collateral will consist of modified FHA, VA, U.S. Department of Agriculture, and Office of Public and Indian Housing loans whose original terms are greater than 361 months and less than or equal to 480 months, and all loan modifications must have been occasioned by default or reasonably foreseeable default. The new pool type will be ready for use by October, although actual issuance of pools will depend on FHA, VA, USDA and PIH authorizing this option.

• Why it matters: The use of 40-year loan modifications by the government insuring agencies would create significant challenges without a liquid corresponding secondary market execution. This Ginnie Mae custom pool option allows servicers to better support homeowners in distress by offering 40-year loan modifications that carry a lower monthly payment than would 30-year terms while retaining the ability to securitize the loans for sale into the secondary market.
• What’s next: MBA will continue to engage with Ginnie Mae in its efforts to support homeowners while also working to ensure any change management challenges caused by new loss mitigation procedures are minimized during this critical time.

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

8. MBA Responds to Agencies’ Request for Information on Financial Institutions’ Use of Artificial Intelligence

On Thursday, MBA filed comments in response to a multi-agency request for information on financial institutions’ use of artificial intelligence. MBA’s comment letter describes AI’s various uses, including in loan underwriting, where AI has shown particular promise. To facilitate broader use of AI by mortgage lenders and servicers, MBA encourages the agencies to clarify how existing fair lending and ECOA adverse action notification requirements apply to AI technologies.

• Why it matters: AI underwriting systems combined with non-traditional underwriting data have the potential to expand access to credit and foster greater financial inclusion.
• What’s next: MBA will continue working with regulators to ensure the regulatory framework is conducive to safe, consumer-beneficial innovation. 

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

9. House Advances Transportation and Infrastructure Legislation 

On Thursday, the House passed a broad $715 billion infrastructure package (H.R. 3684, the Invest in America Act, as amended), largely along party lines. Some provisions within this comprehensive House bill could be merged with a parallel Senate package prior to September 30, when the current federal highway bill authorization is set to expire. MBA’s letter highlighting two housing-related provisions within the package can be found here.

• Why it matters: The administration has endorsed a bipartisan Infrastructure Framework negotiated with a group of 21 senators, which focuses on traditional infrastructure investments such as roads, railways, bridges, and broadband internet. This bipartisan Senate compromise does not presently include investments President Joe Biden has referred to as “human infrastructure,” including affordable housing provisions.
• What’s next: In both chambers, Democratic leaders are pushing a parallel (and more partisan) reconciliation bill process to offset the cost of infrastructure spending via a series of proposed tax changes, including several that could directly impact our industry. The timing and details of negotiations over this reconciliation approach will determine which infrastructure and tax vehicles are ultimately advanced by Congress. 

For more information, please contact Borden Hoskins at (202) 557-2712 or Alden Knowlton at (202) 557-2741.

10. Remote Online Notarization Developments in Multiple States

Recently, multiple states adopted remote online notarization legislation consistent with the MBA-ALTA model bill and the non-partisan Uniform Law Commission’s Revised Uniform Law on Notarial Acts (RULONA). Oregon Governor Kate Brown signed legislation ( SB765) that makes permanent the temporary guidance that enables use of RON for financial transactions. The Illinois General Assembly passed legislation (SB2664) that allows the utilization of remote notarization, and has sent the bill to Governor JB Pritzker for his signature. The New Hampshire Legislature included language in its state omnibus bill (SB134) that allows the use of RON and directs notaries to comply with credential analysis and authentication standards consistent with those developed by the Mortgage Industry Standards Maintenance Organization (MISMO). SB134 was adopted by the conference committee and will now be voted on by both houses for final passage. Lastly, in anticipation of New York Andrew Governor Cuomo signing legislation (S1780) that would allow RON in the state, MBA and the New York MBA submitted a letter to New York Secretary of State Rossana Rosado urging her to promulgate rules that require credential analysis standards consistent with MISMO and the national consensus.

• Why it matters: Oregon becomes the 35th state to adopt RON legislation. Moreover, the anticipated inclusion of New York, Illinois, and New Hampshire to the list of states with RON will be a major boost to the state campaign and bring it closer to the goal of getting all 50 states to pass remote notarization laws.
• What’s next: MBA will continue to work with state and local partners to pass RON legislation in the remaining states.

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

11. Are you a Diversity Champion? Apply for MBA’s DEI Leadership Awards

MBA’s Diversity, Equity and Inclusion (DEI) Leadership Awards are back! Now in its sixth year of recognizing MBA member companies, this awards program acknowledges the dedication and creativity that increase DEI efforts within a company’s leadership and employee base. If your organization is a champion of diversity, share how you are inspiring change and highlight your success by applying today.

• What’s next: Applications are due August 13. Prior to getting started, please review helpful these application tips to help you prepare your entry.

For more information, please contact MBA’s DEI Team.

12. 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:

• A Strategy for Executing a Successful LIBOR Transition (Single-Family) – July 8
• MISMO API Toolkit for Technical Audience – July 8
• CONVERGENCE: Intersections of Supply and Demand Challenges in Accessing Affordable Homeownership – July 8
• A Strategy for Executing a Successful LIBOR Transition (CREF) – July 12
• Do Commercial Servicer Ratings Matter? – July 14
• Planning for Community Reinvestment Act Modernization – July 15

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