MBA Advocacy Update Jan. 9, 2023

January 9, 2023

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

With elected members of both the House and Senate returning to Washington on Tuesday to organize for the 118th Congress, all eyes remained focused last week on the evolving process to officially elect a House Speaker.

[VIDEO] Watch MBA leaders discuss 2022 wins, initiatives, and challenges, and what YOU need to know in 2023, including the forecasts for single-family and commercial/multifamily real estate in our State of the Association.

MBA-Backed VA Appraisal Modernization Legislation Now Public Law 117-308

On December 27, President Joe Biden signed H.R. 7735, the Improving Access to the VA Home Loan Benefit Act of 2022, into public law (P.L. 117-308). The Senate had passed the bill by unanimous consent – in the same form by which it passed the House last fall – just eight days earlier. Enactment of this MBA-endorsed legislation will help to ensure servicemembers, veterans, and their families have access to more affordable, sustainable homeownership opportunities through the Department of Veterans Affairs’ Home Loan Program. The reforms included in H.R. 7735 will direct the VA to revisit existing program requirements to make appraisals more readily available and less cumbersome for buyers and lenders by requiring the VA to review appraisal certification requirements, encourage hybrid appraisals, employ emerging technologies, and revisit policies on property inspection waivers, minimum property requirements, and comparable sales. MBA President and CEO Bob Broeksmit, CMB, applauded the bill’s passage in a press statement.

Why it matters: MBA strongly advocated for this bill and its Senate companion, S. 4208, throughout last year. Those efforts included Mark Jones, MBA’s current Chairman-elect, and CEO and Co-Founder of Amerifirst Home Mortgage, testifying before the House Veterans’ Affairs Subcommittee on Economic Opportunity on May 18, 2022. After the House passed H.R. 7735 in September, MBA issued a Mortgage Action Alliance call to action that urged members to contact their senators to pass the legislation.
What’s next: MBA again thanks all our members who helped execute this year-long advocacy effort. We will continue to work with the VA, the new Congress, industry members, and other key stakeholders to ensure veterans and their families have access to more affordable, sustainable homeownership opportunities.

For more information, please contact Alden Knowlton at (202) 557-2741, Borden Hoskins at (202) 557-2712, Ethan Saxon at (202) 557 2913 or Tallman Johnson at (202) 557-2866.

2. Lawmakers Introduce Bipartisan Bill Aimed at Flawed IRS Implementation of Updated IVES System

In late December, Rep. Patrick McHenry (R-NC), the Ranking Member of the House Financial Services Committee, and Rep. Jimmy Panetta (D-CA), a member of the House Ways and Means Committee, introduced H.R. 9589, the IRS Electronic Income Verification Act. The bill would amend the Taxpayer First Act to clarify that taxpayer identity verification is the responsibility of users of the system, rather than the taxpayer, to ensure the successful development of the electronic Income Verification Express Service (IVES) system of the Internal Revenue Service (IRS).

Why it matters: As part of the bipartisan Taxpayer First Act, enacted in 2019, Congress required the IRS to implement much-needed updates to its IVES system that financial services providers use to submit Form 4506-C to verify a credit applicant’s income, helping to prevent fraud and ensure accurate underwriting. The legislation included a temporary, two-year user fee increase to pay for the upgrades. MBA, in coalition with other stakeholders, has met with members of Congress, key congressional committees, and the administration to highlight the problems with the proposed IRS solution. The IRS is moving forward with an unnecessarily costly and overly complex system that does not meet the original intent of Congress.
What’s next: MBA will continue working with the new Congress to pressure the IRS to overhaul and update the IVES system.

For more information, please contact Alden Knowlton at (202) 557-2741, Borden Hoskins at (202) 557-2712 or Rick Hill at (202) 557-2718.

FHFA Releases Annual Scorecard for the GSEs and Common Securitization Solutions

On Wednesday, the Federal Housing Finance Agency released its 2023 Scorecard for Fannie Mae and Freddie Mac, as well as for Common Securitization Solutions. The 2023 Scorecard builds on progress made last year and focuses on two equally weighted areas: promoting sustainable and equitable access to affordable housing and operating in a safe and sound manner. The 2023 Scorecard highlights specific single-family initiatives including facilitating a greater supply of affordable housing, taking meaningful actions to achieve the goals and objectives of the GSEs’ Equitable Housing Finance Plans, updating the current pricing framework, modernizing the appraisal process and minimizing appraisal bias, effectively managing risks and maintaining required liquidity levels, and ensuring a focus on the effects of climate change.

Why it matters: The Scorecard outlines FHFA’s expectations for the GSEs’ priorities in the coming year. These priorities, in turn, influence the GSEs’ operations across a wide range of policy areas and business activities. FHFA notes that the objectives found in the 2023 Scorecard should better position the GSEs to support the housing market throughout the economic cycle and fulfill statutory mandates.
What’s next: MBA will continue to work with the GSEs as they implement the Scorecard initiatives and, over a longer term, pursue the necessary conditions to exit conservatorship.

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

Biden Administration Updates Fall 2022 Regulatory Agenda

On Wednesday, the Office of information and Regulatory Affairs (OIRA) updated its Unified Agenda of Regulatory and Deregulatory Actions report on the regulatory actions the federal government agencies are taking in the near and long term. This agenda contains rulemakings, proposed rulemakings, and other actions that the regulators expect to take in the next few months, including:

FHA
rules to streamline and reform FHA servicing and claims, including a maximum claim timeline
“modernization” of FHA’s face-to-face servicing requirements
rules permitting 40-year modifications
reinstatement of the 2013 Disparate Impact rule
CFPB
a proposed rule amending FIRREA with respect to automated valuation models
a proposed rule governing Property Assessed Clean Energy Financing
beginning a FCRA rulemaking process
FHFA
a proposed rule amending the Enterprise Capital Regulatory Framework
a final rule amending the Duty to Serve rule with respect to colonias
a proposed rule on FHLB membership is no longer listed, likely due to FHFA’s ongoing review of the FHLB system
VA
rules changing VA’s loss mitgation options
amendments to VA’s servicing tier rankings
a final rule on revisions to VA Cash-Out Home Refinance
What’s next: Click here for a comprehensive summary of relevant single family mortgage rules in the regulatory agenda.

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

MBA Urges Increase in Allowable Fee for FHA and VA Assumptions

MBA recently submitted a letter to the Federal Housing Administration and the VA requesting that both agencies increase the allowable fee associated with processing assumption loans. There has been a significant increase in demand for assumptions, given the high interest rate environment. The letter highlights that FHA and VA’s allowable fees do not come close to covering the cost of processing and underwriting an assumption request for a new buyer/borrower. MBA recommends that FHA and VA change their policy to allow a fee of up to $3,500 per assumption and index the fee periodically for inflation.

Why it matters: Servicers of FHA and VA loans are required to process assumption requests. Given the wide disparity in current interest rates and those on recently originated FHA/VA loans, MBA members are experiencing a significant increase in assumption requests that will result in substantial losses for each such transaction.
What’s next: MBA will continue to engage with FHA and VA on behalf of the industry to update policies that better reflect the current market conditions.

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

MBA Offers Recommendations to VA in Response to IRRRL NPR

MBA in late December submitted a letter in response to the VA’s Notice of Proposed Rulemaking (NPR) on proposed amendments to its rule regarding VA-backed interest rate reduction refinancing loans (IRRRLs). The proposed rule seeks to clarify technical definitions regarding the statutory recoupment standards and proposes a formula that lenders would use to determine the recoupment period, among other requirements, to provide greater certainty to lenders when executing an IRRRL. MBA’s comments underscore the need for the VA to further clarify the requirements surrounding its proposed recoupment calculation, net tangible benefit, and loan seasoning. The letter also highlights False Claims Act concerns from members regarding the utilization of the comparison disclosure as required by the proposed rule.

Why it matters: The VA IRRRL program gives our nation’s veterans a low-cost, expedited path to reduce their interest rate and lower their monthly payments when market rates decline. Current IRRRL requirements expose lenders to uncertainty and compliance risks that increase costs for lenders and borrowers.
What’s next: MBA will continue to engage with FHA and VA on behalf of the industry to update policies that better reflect the current market conditions.

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

Proposed FHA ML looks to Implement PAVE Task Force Recommendations

On Tuesday, to mitigate bias in the appraisal process and make borrowers more aware of their options, FHA released a draft Mortgagee Letter to the HUD Drafting Table that would revise and update its guidance on borrower and lender requests for appraisal reconsideration of value (ROV). The proposed ML would update the FHA Single Family Housing Policy Handbook to reflect suggestions from the PAVE Task Force Report published last year and provide borrowers with clearer guidance to request an ROV based on indications of bias. This guidance will apply to appraisals for FHA-insured Title II and HECM loans.

Why it matters: MBA supports the objectives of a new ROV process and will review the ML to ensure it sets reasonable expectations for borrowers and does not expose lenders to risks of “appraiser independence” violations. The recommendations of the PAVE Task Force report covered a wide range of areas, including oversight of the appraisal industry, reconsideration of value processes, barriers to entry for new appraisers, data collection and analysis, and consumer education.
What’s next: MBA welcomes member feedback and will draft comments for submission by the February 3, 2023, deadline.

For more information, please contact Darnell Peterson at (202) 557-2922.

New York Governor Signs Concerning Foreclosure Legislation; Industry to Pursue Amendments

On December 30, 2022, despite the robust advocacy efforts of the NY MBA, MBA, and industry partners, Gov. Kathy Hochul (D) signed legislation (A7737), which will prohibit lenders and servicers operating in New York from unilaterally halting a foreclosure action and restarting the loan’s statute of limitations to offer homeowners with much needed loss mitigation opportunities. In addition, the legislation abrogates the well-reasoned ruling of New York’s highest court in the Freedom Mortgage v. Engel case. Prior to enactment, the financial services industry urged Hochul’s administration to veto A7737 to preserve a valuable tool the industry uses to offer federally backed loss mitigation options to homeowners. Specifically, MBA and NYMBA worked with NY Department of Financial Services to provide data to support the case for a veto. Now, both associations will seek to amend the new law as quickly as possible during the 2023 legislative session in order to allow members to again unilaterally halt a foreclosure action to help consumers.

Why it matters: Amendments to the new law will likely be limited to foreclosure actions that occur prospectively and would not address the foreclosure actions that are retrospective to the statute’s December 30, 2022, enactment date.
What’s next: MBA and NYMBA will continue to advocate on this issue and will pursue all opportunities to mitigate the problematic provisions of this law.

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

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:

Ten Things Your Company Must Do in 2023 – January 18
Using the MISMO API Toolkit to Build Your Own FIPS Code Lending API – January 26
Combating the Downturn: Strategies to Optimize Borrower Support in Recessionary Environments – January 31
Home Equity Lending: An Assessment of Today’s Market Landscape & Cashout Opportunities – February 9
Five Steps to Improve Efficiency, Compliance and Automation in Your Mortgage Operations – February 16

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.

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