MBA Advocacy Update June 6 2022

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

MBA sent a letter to the FDIC Friday on its climate risk management principles for financial institutions. On Tuesday, MBA and the Housing Policy Council responded to HUD’s proposed 40-year modification, which would increase the maximum allowable term for an FHA-insured loan modification from 360 months to 480 months. And recently, FHFA finalized two rules related to the Enterprise Regulatory Capital Framework for Mac the GSEs. 

MBA Comments on FDIC Statement of Principles on Climate-related Risk Management

On Friday, MBA submitted comments on the Federal Deposit Insurance Corp.’s Statement of Principles for Climate-Related Financial Risk Management for Large Financial Institutions. The FDIC Statement of Principles was substantively identical to the Office of the Comptroller of the Currency’s Statement of Principles that MBA commented on in February of this year. In this comment letter, MBA supported both the FDIC’s and OCC’s proposals to rely on a principles-based approach to managing this risk, one that leverages existing risk management and supervisory processes. The letter also reiterated prior comments on the OCC Statement of Principles, including raising concerns around expectations for scenario testing.

• Why it matters: While the Statement of Principles technically applies only to depository institutions with more than $100 billion in total consolidated assets, federal regulators will also adapt them to oversee smaller institutions’ management of climate-related risks across all sizes of institutions.
• What’s next: MBA will continue to monitor federal efforts to increase oversight and attention on climate-related issues, including the management of climate-related financial risks.

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

MBA Responds to HUD’s Proposed 40-Year Modification

On Tuesday, MBA and the Housing Policy Council responded to HUD’s proposed 40-year modification, which would increase the maximum allowable term for a Federal Housing Administration-insured loan modification from 360 months to 480 months. While supportive of HUD’s proposal to add the 40-year modification to FHA’s loss mitigation toolkit, MBA has recommended keeping the 30-year modification as a core component of loss mitigation, while allowing flexibility to achieve the targeted payment reduction at terms between 360 and 480 months.   

• Why it matters: Allowing a modification of up to 480 months will provide an additional opportunity to help consumers facing long-term hardships and address the unique challenges of future adverse market conditions.
• What’s next: MBA will continue to work with FHA and Ginnie Mae to ensure secondary market certainty for extended term modifications and promote the use of the FHA drafting table for final execution of the proposed policy to ensure operational success for servicers.

For more information, please contact Brendan Kelleher at (202) 557-2779 or Gabriel Acosta at (202) 557-2811.

FHFA Issues Final Rules on GSE Capital Framework Disclosures and Capital Planning

Recently, the Federal Housing Finance Agency finalized two rules related to the Enterprise Regulatory Capital Framework for Fannie Mae and Freddie Mac. The first rule introduces additional public disclosure requirements for the GSEs and is intended to align with many of the public disclosure requirements for large banks under the regulatory capital framework adopted by U.S. banking regulators. The second rule requires the GSEs to submit annual capital plans to FHFA and provide prior notice for certain capital actions, which generally is consistent with the regulatory framework for capital planning for large bank holding companies.

• Why it matters: These final rules, in conjunction with the earlier MBA-supported changes to the leverage ratio and the treatment of credit risk transfer, represent FHFA’s broad reforms to the GSEs’ capital framework.
• What’s next: MBA will continue to work with FHFA on any future issues related to the GSEs’ capital framework and will advocate that FHFA and the U.S. Treasury Department remove a problematic provision from the Senior Preferred Stock Purchase Agreements that requires the GSEs to adhere to an older version of the capital framework, which negates some of the positive effects of the revised framework.

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

CFPB Launches New Office of Competition and Innovation 

On May 24, the Consumer Financial Protection Bureau renamed the Office of Innovation to the Office of Competition and Innovation, a change intended to “help spur innovation in financial services by promoting competition and identifying stumbling blocks for new market entrants.” The Office of Innovation had been responsible for the Bureau’s no-action letter and compliance assistance sandbox programs. According to the announcement, these programs “proved to be ineffective[.]” Under the new structure, regulated entities and the public will be encouraged to “file rulemaking petitions to ask for greater clarity on particular rules[,]” which the Bureau believes “will help level the playing field and foster competition by ensuring any actions the CFPB takes will apply to all companies in the market.”

The new office will take steps to promote competition in the financial services industry by exploring “ways to reduce the barriers to switching accounts and providers[,]” examining “market-structure problems that create obstacles to innovation[,]” and learning “how bigger players can gain advantage over smaller players[.]”

• Why it matters: The Office of Innovation’s tools—No Action Letters and a Compliance Assistance Sandbox—held promise to spur innovation in cooperation with the Bureau. Rulemaking is a more time-consuming and less nimble process. Finally, this underlines the Bureau’s increasing focus on competition.
• What’s next: MBA has already outlined our views of the powers and limits of the Bureau’s authority to regulate competition and will continue to do so where appropriate.

For more information, please contact Justin Wiseman at (202) 557-2854 or Gabriel Acosta at (202) 557-2811.

CFPB Issues Interpretive Rule Clarifying States’ Ability to Enforce Consumer Financial Law

On May 19, the CFPB released an interpretive rule outlining states’ authorities to enforce federal consumer financial protection law. The interpretive rule outlines the consumer financial protection laws states can enforce. These include the Consumer Financial Protection Act itself, as well as the 18 enumerated consumer laws listed in the CFPA “and certain other laws, along with any rule or order prescribed by the CFPB…” The rule also asserts that states’ enforcement authorities are not subject to certain limits that apply to the CFPB. As a result, states may pursue enforcement actions against “a broader cross-section of companies and individuals” than can the CFPB. Finally, CFPB enforcement actions do not halt state enforcement actions. Thus, states may pursue “complementary enforcement activities…to stop or remediate harm that is not addressed by a CFPB enforcement action against the same entity.”

• Why it matters: While these powers were arguably already in force, this interpretative rule is a clear signal to state enforcement and regulatory agencies to feel free to bring more cases in areas where the Bureau has federal jurisdiction.
• What’s next: The interpretive rule went into effect immediately upon its May 26 publication in the Federal Register. MBA, in partnership with state MBAs, will monitor developments in this area and respond as appropriate.

For more information, please contact Justin Wiseman at (202) 557-2854 or Gabriel Acosta at (202) 557-2811.

CFPB Clarifies ECOA’s Application to “Black-Box” Credit Algorithms 

On May 26, the CFPB released a Consumer Financial Protection Circular explaining how the adverse action requirements found in the Equal Credit Opportunity Act apply to credit models using complex algorithms. Specifically, the circular confirms that “ECOA does not permit creditors to use technology that prevents them from providing specific and accurate reasons for adverse actions.” Further, “[c]reditors who use complex algorithms—including artificial intelligence or machine learning technologies—to engage in credit decisions must still provide a notice that discloses the specific, principal reasons for taking adverse actions.”

• Why it matters: The Bureau is keenly focused on algorithmic underwriting and ensuring explainability of any models. They have issued ECOA guidance on this subject in the past and this recent circular is a cue to states and other enforcers to support their position.
• What’s next: MBA will continue to monitor developments in this area and help our members understand the boundaries around new credit technologies.  

For more information, please contactJustin Wiseman at (202) 557-2854 or Gabriel Acosta at (202) 557-2811.

Federal Agencies Publish Revised Interagency Flood Insurance Q&As 

On Tuesday, revised interagency flood insurance Q&As were published in the Federal Register. The Q&As were jointly approved on May 11, 2022, by the OCC, Federal Reserve, FDIC, National Credit Union Administration and the Farm Credit Administration. They cover both federal flood insurance rules and rules on private flood insurance acceptance.

• Why it matters: MBA led industry comments in response to two rounds of proposed revisions to the prior Q&As. Among other positive responses, the agencies added a new Q&A to clarify that blanket policies may include a deductible higher than the insurable value of any individual building covered by the policy.
• What’s next: MBA will continue to review the final Q&As and assess the extent to which they address concerns.

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

NY Legislature Adjourns without Amending Flawed Foreclosure Legislation; MBA and Industry Partners Call for Gubernatorial Veto 

Despite strong opposition by MBA, the New York Mortgage Bankers Association and a Mortgage Action Alliance industry campaign, the advocacy efforts to amend the “Foreclosure Abuse Prevention Act” (S5473 & A7737), prior to the end of the state legislative session, were unsuccessful. The mortgage finance industry engaged in an intense direct advocacy push, which including a letter to Governor Kathy Hochul (D) urging her to veto the bill or work with the legislature and industry to introduce and pass amendments. However, other major policy issues took priority at the end of the legislature’s calendar session and made it difficult to fix the bill in the allotted time remaining.

• Why it matters: If enacted, the measure would abrogate the well-reasoned ruling by the New York Court of Appeals in Freedom Mortgage Corporation v. Engel, exposing investors to losses and making it more difficult for servicers to provide home retention options to borrowers.
• What’s next: MBA will continue to work with NYMBA to communicate with the governor and her staff to express our grave concerns with FABA and encourage her to veto the legislation. In addition, MBA and NYMBA will advocate for future amendments to FABA that can be introduced during the next legislative session to address our concerns with the language of the bill.

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

Ohio Passes Remote Work Legislation, Heads to Governor for Signature

On Wednesday, the Ohio legislature unanimously passed legislation (SB 264) that will permit mortgage loan originators to work away from a licensed branch location. SB 264 will now head to Governor Mike DeWine (R) for his signature and will go into effect 90 days after the bill is signed.

• Why it matters: SB 264 is consistent with the MBA model and other states that have acted to permit remote work. If SB 264 is signed, there will be 19 states that have enacted legislation, promulgated rules, or issued regulatory guidance that permanently allows MLOs to work from a remote location.
• What’s next: MBA will continue to work with our state and local association partners to advocate for its model legislation and regulation to create licensing flexibility nationwide.

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

REGISTER: MBA Single-Family Research Showcase: June 22-23

On June 22-23, join MBA’s Research and Economics team for its annual, two-day online MBA Single-Family Research and Economics Showcase. Led by MBA SVP and Chief Economist Mike Fratantoni, analysts will detail the most current results and insights from their residential surveys, forecasts, and reports.

• Why it matters: Session topics include: A Keynote on the Economy and the Mortgage Market; Latest Performance Benchmarking Data for Production and Servicing; Industry Volume and Demand; Demographics, Market Profiles and Players; Forbearance and Delinquency; Technology and Innovation; Staffing Issues; and Views on the Future of the Mortgage Industry, as well as a Q&A with MBA’s analysts.
• What’s next: Register to attend. CPE credit is available. 

For more information, please contact Marina Walsh at (202) 557-2817 or Jenny Masoud at (202) 557-2879.

REGISTER: VOICES: Courageous Conversations with Men of Color

MBA is pleased to extend its award-winning webinar series, Voices: Courageous Conversations with Women of Color, to include a new conversation focusing on the male experience. Hear from a dynamic and diverse lineup of male industry leaders on their personal journeys throughout their careers. This timely conversation will inspire and inform while giving voice to the challenges and lessons learned. 

There will be two sessions highlighted in this series:

• June 21: Courageous Conversations with Men of Color
• June 28: Courageous Conversations with Men as Allies

What’s next: This virtual series is complimentary for MBA Members. Learn more here. For more information, please contact the DEI team.

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 seventh 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 5. Prior to getting started, please review application tips to help you prepare your entry.

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

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:

• Effective Internal Audit Function: The Fundamentals – June 8
• CFPB, UDAAP and the Focus on Junk Fees – June 9
• Serving Loan Applicants with Limited English Proficiency – June 14
• Leveling Up Your Social Media Strategy with Paid Advertising – June 28
• How to Navigate Lower Margins and a Tighter Market Through Effective Leadership and Embracing Technology – June 28

MBA members can register for any of the above events and view recent webinar recordings. For more information, please contact David Upbin at (202) 557-2931.