House Passes $3 Trillion COVID-19 Relief Package; MBA Letter Details Industry Priorities
The House on Friday passed a massive $3 trillion pandemic relief bill on Friday that includes several key housing provisions advocated by the Mortgage Bankers Association.
Ahead of the bill’s passage, MBA provided House and Senate leadership with its legislative priorities for the next relief package for homeowners and renters dealing with the broad economic effects of the coronavirus pandemic.
H.R 6800, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (https://www.congress.gov/bill/116th-congress/house-bill/6800) is the fifth in a series of legislative proposals related to the economic fallout from the pandemic in the past two months. House Speaker Nancy Pelosi, D-Calif., called the bill a Democratic Party “wish-list;” it passed by a 208-199 vote largely along party lines, with 14 Democrats opposing and one Republican, Rep. Peter King, R-N.Y., voting yes.
The bill, according to Ernie Jolley, MBA Associate Vice President of Legislative and Political Affairs, includes $1 trillion in funding for states and localities; another round of direct payment to Americans directly affected by the pandemic; extension of unemployment insurance increases; funding for hospitals and virus testing; and a rollback of the State and Local Tax (SALT) cap.
Specific to MBA members, H.R 6800 includes a series of housing provisions, including $100 billion for rental assistance; $75 billion for broad housing assistance with mortgage vouchers through state housing finance agencies; establishment of a liquidity facility for mortgage servicers; expansion of forbearance coverage to include non-government-backed loans; an extension of the so-called GSE Patch through June 2022; and liability safe harbor for servicers offering forbearance.
MBA President and CEO Bob Broeksmit, CMB, issued a statement (https://www.mba.org/2020-press-releases/may/mba-statement-on-the-house-passage-of-the-heroes-act) on the House action:
“MBA acknowledges the House passage of the HEROES Act, particularly Division K of the bill that contains several key provisions impacting homeowners and renters across our nation. We are grateful that the bill would direct the Federal Reserve credit facility authority enacted under the CARES Act to be utilized, as needed, by mortgage servicers and residential rental property owners. This would allow them to more smoothly implement the unprecedented, but well warranted, forbearance and eviction moratorium requirements established earlier this year.
“We are also grateful for the bill’s provisions that would set the marker for further discussions on additional direct rental and homeowner relief. We look forward to working with leaders in both parties of the Senate and House – and within the administration – as discussions progress on this debate.”
H.R. 6800, in its current form, has virtually no chance of clearing the Republican-controlled Senate; Majority Leader Mitch McConnell, R-Ky., has already indicated th Senate will not take up the bill, calling it a “totally unserious effort.”
However, Pelosi she expects H.R. 6800 to serve as a baseline for broader discussions with the Senate and the Trump Administration. “No bill becomes law without negotiations,” she said Sunday.
Ahead of H.R. 6800’s passage Friday, MBA sent a letter to congressional leadership outlines legislative priorities to help homeowners, renters and the real estate finance market amid ongoing implementation of the CARES Act. The letter also highlights recommendations on what Congress should include in the next COVID-19 relief package.
“As Americans begin to emerge from quarantine and shift to a phased reopening of everyday life, MBA believes these proposals will contribute to the country’s economic recovery, sometimes without the need of additional taxpayer assistance,” said MBA Senior Vice President of Legislative and Political Affairs Bill Killmer.
Killmer noted due to MBA’s ongoing advocacy, the HEROES Act includes critical language on direct rental and homeowner relief for individuals and families affected by COVID-19, and it directs Treasury to establish a dedicated liquidity facility through the Fed’s 13(3) authority specifically for mortgage servicing. “These provisions will provide welcome certainty and support to the mortgage markets – to the benefit of borrowers, lenders, servicers, investors and other market participants.”
The letter includes several sets of recommendations:
—Forbearance Requirements and the Potential Need for Adequate Liquidity. MBA noted Congress and the administration have correctly decided that a nationwide, broad-scale forbearance program for federally backed mortgages is appropriate, “but policymakers must ensure this program is undertaken responsibly in order to avoid unintended consequences and market uncertainty.”
MBA believes that the Federal Reserve and the Treasury Department should use a portion of the funding provided in the CARES Act to establish one or more liquidity facilities – for both the single-family and multifamily markets – to ensure that servicers can provide forbearance to distressed borrowers for the duration of this crisis. MBA further recommends that Congress amend the National Housing Act to permit Ginnie Mae issuers to access these liquidity facilities as a source of funds to pay for advances to securities holders, as well as to cover advances made to taxing authorities and insurers. In order for such a system to work, Congress must adjust Ginnie Mae’s legal authority to approve pledges of an issuer’s future reimbursements on servicing advances.
MBA also recommended Congress clarify that Section 4022 applies over the same covered period as the related section 4023 of the CARES Act. “Absent an explicit legislative definition of a covered period within these forbearance requirements, courts may examine these relevant sections in the future and arrive at their own conclusions and definitions, thereby introducing an unnecessary element of market uncertainty,” MBA said.
—Forbearance and Non-Government-Backed Mortgages. MBA said it and its members are working to extend relief to all those impacted by the pandemic, noting in just the past month, more than three million borrowers have been provided COVID-related loan forbearances. MBA cautioned, however, that any contemplated expansion of these requirements to private investors and owners “could result in unintended consequences that warrant further consideration and public discussion,” noting servicers do not control loss mitigation outcomes—investors and loan owners do—and a mandate that they provide forbearance or loan modifications would expose servicers to financial liability for breaching contractual obligations to private investors and insurers. MBA said any contemplated legislation in this area could implicate constitutional questions that deserve further analysis around takings of private property, which include contract rights and the ability of the federal government to modify contracts between private parties.
In addition to these concerns, MBA notes the following specific issues:
• The Consumer Financial Protection Bureau’s Servicing Rules already require notifications and an evaluation of borrower’s loss mitigation applications prior to proceeding with foreclosure. MBA said any legislation contemplated provide significant borrower protections beyond what is already in place, without imposing burdensome new requirements for servicers to implement during this national emergency.
• Automatically giving forbearance to every delinquent borrower regardless of whether they are experiencing a COVID-related hardship may not be the best outcome for the borrower. “For borrowers who have missed multiple payments, engaging with their mortgage servicer prior to obtaining a forbearance empowers borrowers to make a decision that fits their circumstances,” MBA said. “A “one-size-fits-all” approach to forbearances would ignore the realities that different borrowers are in different situations, particularly when access to CARES Act forbearances is a streamlined process. Finally, at that point of delinquency, servicers would have already made multiple attempts to make contact with the borrower and provided a written notice to contact them regarding loss mitigation options, particularly for federally backed loans.”
—Early Payment Forbearance. MBA said legislation is needed to prohibit the GSEs and FHA from denying the purchase or the insuring of recently closed loans, of all loan types and purposes, simply because the borrower has requested (or entered into) forbearance. Similarly, MBA said legislation should prohibit the GSEs or FHA from applying any pricing, repurchase, or indemnification requirements that are more stringent than those that apply to similarly situated loans that are not in forbearance.
—Emergency Rental Assistance and Broad Housing Assistance. MBA recommends Congress establish a comprehensive emergency rental assistance program sufficient to ensure that everyone who is impacted by COVID-19 does not lose their rental home after they have suffered a reduction in income or who subsequently fall so far behind on rent they will face an increased likelihood of being evicted. “Such a program should be designed to provide assistance to renters in need as quickly as possible,” MBA said. “Millions of renters are being hit hard by the impacts of the pandemic, and providing a way to help those renters maintain their homes through this tough period will be critical to their ability to participate in the future economic recovery.
—Section 232 Loan Forbearance. MBA said Congress should amend the CARES Act’s definition of a “multifamily borrower” to include a borrower of a HUD Section 232 loan secured by a nursing home, assisted living facility, or board and care facility.
—Tenant Eviction Moratorium. To reduce the chance of any potential consumer harm, MBA said Congress should clarify in section 4024(b) of the CARES Act that its protections are limited to tenants experiencing COVID-19 related hardships.
—Term Asset-Backed Securities Loan Facility (TALF). MBA recommends Congress direct the Federal Reserve to include newly issued AAA CMBS and SASB transactions as eligible collateral within the TALF 2.0 program, as they were included in the program during the Great Recession.
—Current Expected Credit Losses (CECL). MBA said the CARES Act relief from implementation of the FASB CECL methodology provided under section 4014 should be extended to include non-depository institutions – including life insurers and independent mortgage bankers – as well as to depository institutions.
—Remote Online Notarization (RON). MBA recommends advancing bipartisan, bicameral legislation (S. 3533 and H.R. 6364) designed to allow notaries in states without enacted remote online notarization laws the ability to execute remote real estate closing transactions, provided they meet minimum standards, during this period of national crisis.
