MBA Advocacy Update Aug. 2 2021

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

On Tuesday, the Conference of State Bank Supervisors finalized its model state regulatory prudential standards for IMB servicers. Also last week, the House passed a number of Fiscal Year 2022 funding “minibus” bills, including one containing robust funding for HUD. And Thursday, the House Financial Services Committee passed H.R. 4616, a LIBOR transition proposal, by voice vote.

1. CSBS Releases Final IMB Servicer Prudential Framework

On Tuesday, the Conference of State Bank Supervisors finalized its model state regulatory prudential standards for IMB servicers. The framework focuses on capital and liquidity requirements, as well as corporate governance standards, and reflects several key MBA recommendations. MBA President and CEO Bob Broeksmit, CMB, released a statement noting the importance of uniform standards across the country and alignment between federal and state requirements.

• Why it matters: The CSBS endorsement of uniform state-level capital and liquidity requirements for IMB servicers comes as both the Federal Housing Finance Agency and Ginnie Mae are considering revisions to their respective requirements. MBA is deeply engaged with these entities to promote requirements that are calibrated appropriately and structured to incentivize strong risk management practices. MBA closely worked with CSBS to ensure that the recommendations to its state regulator members aligned with federal standards and avoided creating conflicts between state and GSE/Ginnie Mae requirements. CSBS also incorporated MBA recommendations to ensure administrative process requirements are followed in any supervisory action related to the standards.
• What’s next: The requirements set forth in the CSBS framework are effective only through implementation by individual states – either through regulation or legislation. CSBS has committed to “work to ensure that implementation among states is as uniform as possible.” MBA will pursue similar efforts in the coming months and years.

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

2. House Advances HUD Funding Legislation  

Last week, the House passed several Fiscal Year 2022 funding “minibus” bills, including one containing robust funding for HUD. H.R. 4502, the Labor, Health and Human Services, Education, Agriculture, Rural Development, Energy and Water Development, Financial Services and General Government, Interior, Environment, Military Construction, Veterans Affairs, Transportation and Housing and Urban Development Appropriations Act, 2022, passed by a party line vote of 219-208.  

• Why it matters: The proposal contained substantial funding increases for Federal Housing Administration’s cybersecurity and IT upgrades, Ginnie Mae’s administrative expenses, and housing counseling. MBA sent a letter to House leadership and top appropriators advocating for the industry’s housing priorities, including continued specified funding for FHA’s single-family quality assurance/control systems upgrades.
• What’s next: With Congress unlikely to reach agreement to move all 12 appropriations bills before September 30, legislators must pass a stop-gap continuing resolution to keep the government operating beyond October 1.

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

3. House Financial Services Committee Advances LIBOR Transition Legislation 

On Thursday, the House Financial Services Committee passed by voice vote H.R. 4616, the Adjustable Interest Rate (LIBOR) Act of 2021. The bill establishes a process for contracts that reference the London Interbank Offered Rate to continue functioning after the cessation of LIBOR, and directs the Federal Reserve to issue rules and regulations for alternative reference rates that would replace LIBOR for existing contracts. MBA was joined by multiple coalition partners in sending a letter to the Committee.   

• Why it matters: LIBOR is the reference rate that indexes trillions of dollars of financial contracts, including mortgage loans. U.S. banking regulators have advised that beginning in December financial contracts should discontinue references to LIBOR, and the heads of the financial regulators are unified that a LIBOR transition will require legislation.  
• What’s next: MBA will continue working with coalition partners and congressional allies to refine the bill as it advances through the House and toward possible Senate action. 

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

4. ARRC Issues SOFR Recommendations; Bank Regulators Clarify Capital Treatment of LIBOR Conversions

Last week, the Alternative Reference Rates Committee announced it is formally recommending forward-looking Secured Overnight Financing Rate term rates published by the CME Group. This announcement follows recent steps taken by regulators and market participants to transition activity in key derivatives markets from LIBOR to SOFR – a necessary step to develop robust SOFR term rates. Separately, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the Federal Reserve each issued FAQs clarifying that the transition from LIBOR to an alternative reference rate for a capital instrument does not, on its own, change key elements of the regulatory capital treatment of that instrument.

• Why it matters: One significant shortcoming of SOFR had been the lack of broadly-available, forward-looking term rates for use in various types of lending. The ARRC’s announcement should alleviate this concern and serve as a tailwind for continued growth in the use of SOFR. The bank regulators’ announcements provide greater clarity to their regulated banks and remove a potential impediment to the transition to alternative reference rates.
• What’s next: While most tenors of U.S. Dollar LIBOR will be published until mid-2023, various U.S. regulators have stated that they expect financial institutions to cease originations of new loans indexed to LIBOR by year-end 2021.

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

5. Regulators in Iowa, New Hampshire Issue Guidance to Permit Remote Work

On Monday, the Iowa Division of Banking released written guidance indefinitely extending remote work flexibilities for mortgage loan originators. In its statement, the IDOB expressed it had no objections to a licensee permitting its employees to work from a remote location under the supervision and in compliance with the licensee’s written policies and procedures regardless of a pandemic declaration. In addition, the New Hampshire Banking Department clarified their stance on remote work by issuing guidance that permits an MLO to work from a remote location, including the MLO’s home.

• Why it matters: The remote work provisions of the Iowa’s guidance are consistent with the MBA model and other states that have acted to permit remote work. The guidance also requires consumer data and personal information be protected in a manner consistent with the Gramm-Leach-Bliley Act and the Safeguards Rule established under the Federal Trade Commission set forth at 16 CFR Part 314. The New Hampshire guidance provides welcomed licensing flexibility to allow an MLO to work from a remote location.
• What’s next: MBA will continue to work with state and local association partners to advocate for its model legislation and regulation for licensing flexibility. In addition, MBA is asking members to provide any information on legislative or regulatory efforts in their state that would allow remote work by contributing to a Google spreadsheet that will be used to update the information on MBA’s resource center . If you do not have access to a Google account, please contact Kobie Pruitt and he will provide you with a digital copy of the spreadsheet to fill out.

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

6. New Jersey, Illinois Governors Sign RON Legislation

Recently, New Jersey Gov. Phil Murphy (D) signed legislation (AB4250) that enables use of remote online notarizations for financial transactions. In addition, Gov. J.B. Pritzker (D) of Illinois also signed legislation ( SB2664) to allow RON. Both bills are consistent with the national standards for RON adoption present in the MBA-ALTA state model bill and the non-partisan Uniform Law Commission’s Revised Uniform Law on Notarial Acts.

• Why it matters: New Jersey and Illinois become the 36th and 37th states, respectively, to adopt RON legislation. Moreover, the anticipated inclusion of New York and New Hampshire to the list of states with RON will be a major boost to MBA’s campaign and goal of getting all 50 states to pass remote notarization laws.
• What’s next: MBA will continue to partner with state and local associations to pass RON legislation in the remaining states.

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

7. Are You a Diversity Champion? Apply for MBA’s DEI Leadership Awards

MBA’s 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, 2021. Prior to getting started, please review application tips to help you prepare your entry.

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

8. 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:

• Compliance Considerations Before and After a Data Breach – August 10
• C-PACE Financing 101: A Commercial/Multifamily Lender’s Overview – August 12
• Commercial/Multifamily: Core and Non-Traditional Sector Outlooks and Mortgage Risk – August 17
• Bank-Owned Mortgage Divisions: What Bankers Need to Know to Manage Mortgage Banking – August 26
• Budgeting and Financial Planning for Non-Believers – September 9
• Introduction and Walkthrough of MISMO’s Enhanced Logical Data Dictionary (LDD) – October 6

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.