CREF Policy Update Sept. 28: FDIC Chairman Gruenberg Calls for Enhanced Prudential Standards, Increased Nonbank Reporting
1. FDIC Chairman Gruenberg Calls for Enhanced Prudential Standards and Increased Nonbank Reporting in Speech
In a speech on Wednesday at the Exchequer Club in Washington, D.C., Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg said that the Financial Stability Oversight Council (FSOC) should consider enhanced prudential standards and reporting requirements for some money market and mutual funds, hedge funds, and nonbank lenders. He specifically noted the increasing shift of mortgage servicing out of the banking sector and into nonbank mortgage servicing companies and said that “it is important that the FSOC has renewed its efforts to review the risks in these sectors and to consider whether our current regulatory authority is sufficient to address them.” Chairman Gruenberg was also dismissive of the stark criticism from the financial services industry–including early and often from MBA–that the federal banking agencies’ proposed changes to bank capital requirements would cause more activities, including mortgage lending and servicing, to migrate to nonbanks, stating that “the obvious response to that is there should be appropriately strong capital requirements for those activities in the banks, complemented by greater transparency, stronger oversight and appropriate prudential requirements for nonbanks.”
• Why it matters: During the audience Q&A portion of the event, MBA President and CEO Bob Broeksmit, CMB, pushed back on Chairman Gruenberg’s assertion that nonbanks need more regulation and stressed that the threat of additional and unnecessary regulation and costs for IMBs, along with the crippling proposed capital charges for banks, will lead to fewer choices and higher prices for consumers. Broeksmit also pointed out that previous changes to capital requirements were a direct cause of banks’ diminished participation in the mortgage servicing market, and that simply imposing those same standards on nonbanks, as Chairman Gruenberg suggested, is certainly not the answer.
• What’s next: MBA will continue to engage with the White House, Treasury Department, FSOC agencies and staff, and Congress, repeating the serious concerns with the unwarranted efforts to target nonbank financial companies – including nonbank mortgage servicers – and subject them to enhanced, prudential oversight. Additionally, comments on the banking agencies’ proposed changes to bank capital requirements are due by November 30th. MBA is working with members and other industry stakeholders to formulate its response, focusing on the numerous negative impacts these proposed rules would have on the housing finance ecosystem.
For more information, please contact Mike Flood at (202) 557-2745, Fran Mordi at (202) 557-2860 or Matt Jones at (202) 557-2933.
2. HUD Issues Guidance in the Event of a Government Shutdown
The current federal government funding allocated for Fiscal Year (FY) 2023 is scheduled to run out at the end of September. Currently, Congress is engaged in negotiations to secure the necessary funding to sustain the operations of the U.S. Government beyond September 30, 2023. The Department of Housing and Urban Development (HUD) confirmed that only projects with Firm Commitments/Firm Approval Letters issued prior to any government shutdown will proceed. Other requests will only be handled on an emergency basis (e.g., the imminent threat to the safety of the residents or to the protection of property in HUD-insured or assisted multifamily).
• Why it matters: The status of federal government funding is closely tied to the housing industry’s health and stability. Any disruptions or delays in funding can have a ripple effect on mortgage markets, market confidence, housing development, and federal mortgage programs. Should that happen, MBA has created a guide for its members in the event of a federal government shutdown.
• What’s next: MBA will provide ongoing updates as negotiations continue in Congress.
For more information, please contact Megan Booth at (202) 557-2740.
3. MBA, Trades Oppose FHFA’s Suspended Counterparty Program Proposal
On Monday, MBA, the American Bankers Association (ABA), and Independent Community Bankers of America (ICBA) sent a joint letter to the Federal Housing Finance Agency (FHFA) raising strong objections to its proposal to amend the existing Suspended Counterparty Program (SCP). While the industry recognizes the importance of rules that ensure the safety and soundness of Fannie Mae and Freddie Mac (the GSEs), the proposal offers no rationale for its adoption, despite the draconian consequences that could fall on businesses caught up in an expanded SCP. The current SCP allows FHFA and the GSEs to cease doing business with counterparties that have engaged in certain criminal misconduct. The proposed rule would expand that authority to cover certain civil violations and administrative actions by state regulators (e.g., related to fraud, misrepresentation, false statements). FHFA provides no explanation for the need for the expansion, nor does it offer any data suggesting that the GSEs have been materially harmed by FHFA’s inability to suspend counterparties for civil or administrative misconduct. Seventy-four state and local associations also signed on to a separate letter that echoed the same concerns with FHFA’s SCP proposal.
• Why it matters: MBA has significant issues with FHFA’s proposal because it gives them unlimited discretion to suspend counterparties for potentially minor civil or administrative sanctions. It is evident that FHFA has not contemplated the potential harm on the housing finance market and the impact of a suspension. Given the extreme economic and reputational harm that suspended counterparties could face, FHFA should not impose such disproportionate and severe sanctions for the administrative and civil misconduct described in the proposal.
• What’s next: MBA will provide any relevant updates on FHFA’s SCP proposal.
For more information, please contact Justin Wiseman at (202) 557-2858 or Alisha Sears at (202) 557-2930.
4. California Insurance Commissioner Addresses Crisis, CMBA Endorses Plan
California Insurance Commissioner Ricardo Lara announced a package of executive actions aimed at improving insurance choices and protecting Californians from increasing climate threats while addressing the long-term sustainability of the nation’s largest insurance market. Important to commercial real estate, the executive action directs the FAIR Plan to further expand commercial coverage to $20 million per building. California Mortgage Bankers Association CEO Susan Milazzo, a key partner in finding a state solution, said, “The California insurance crisis is creating barriers on the path to homeownership. We support Commissioner Lara’s efforts to expand insurance availability for consumers and business owners across our state. It is critical to implement solutions to restore insurance options for property owners in California.”
• Why it matters: Insurance premiums have risen for 20 straight quarters due to increased risk from natural disasters. Finding adequate insurance coverage in coastal states is increasingly difficult and has affected deals. MBA’s state and local chapters play a critical role in our advocacy efforts. As MBA continues to raise awareness of the issue at the federal level, we will continue to partner with our state and local chapters to find solutions.
• What’s next: MBA will analyze the executive actions fully through its Insurance Risk Management Task Force and communicate the implications of the California executive actions to members. MBA will also continue to advocate through its network of state and local chapters for similar actions in states such as Florida, Texas, and Louisiana.
For more information, please contact William Kooper at (202) 557-2737 or Liz Facemire at (202) 557-2870.
5. Federal Reserve Maintains Federal Funds Rate
The Federal Reserve in its ongoing efforts to slow inflation decided to hold the federal funds rate to a target range of 5.25-5.50% on Wednesday.
• Why it matters: The FOMC emphasized that, “The Committee will continue to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.”
• MBA’s SVP and Chief Economist Mike Fratantoni noted, “As expected, the Federal Reserve did not change its federal funds rate target at the September meeting. However, the FOMC members’ projections signal that they believe they are not yet done in their fight to bring inflation down. The majority of FOMC members still expect another hike this year, even though core inflation has slowed. And many FOMC members now expect that the pace of cuts in 2024 will be somewhat slower than they had thought in June. We expect that inflation will continue to drop closer to the Fed’s target, the job market will continue to slow, and that mortgage rates should begin to reflect that the Fed’s moves in 2024 will be cuts – not further increases. This should provide some relief in terms of better affordability for potential homebuyers.”
For more information, please contact Mike Fratantoni at (202) 557-2935.
6. Commercial and Multifamily Mortgage Debt Outstanding Increased by $37.7 Billion in Second-Quarter 2023
The level of commercial/multifamily mortgage debt outstanding increased by $37.7 billion (0.8 percent) in the second quarter of 2023, according to the Mortgage Bankers Association’s (MBA) latest Commercial/Multifamily Mortgage Debt Outstanding quarterly report, released on Tuesday.
• MBA’s Head of Commercial Real Estate Research Jamie Woodwell said, “Commercial and multifamily mortgage debt outstanding rose again in the second quarter, driven by increases in the mortgage holdings of life companies, the GSEs, banks, and other depositories. Commercial and multifamily mortgage originations are down by more than half from a year ago, and this lack of new demand means that fewer loans are being paid off. This in turn is helping to maintain, and in some cases even grow, the amount of credit outstanding.”
• To view the report, click here.
For more information, please contact Jamie Woodwell at (202) 557-2936.
7. [VIDEO]: On Leading with Kindness with Mortgage Connect’s Cristy Ward
In the mPower Moments episode, mPower Moments Founder Marcia M. Davies sits down with Cristy Ward, Executive Vice President and Chief Strategy Officer at Mortgage Connect. During this insightful interview, Ward discusses her career journey and her experience in working in all facets of the industry. Ward also emphasizes how being authentic in her career has helped her build confidence and become a thoughtful and effective leader. She also discusses her leadership conference, Women Empowering Women, which helps women executives network, identify new opportunities within the industry, and follow their dreams of entrepreneurship.
• What’s next: To watch more mPower Moments, click here.
For more information, please contact Marcia Davies at (202) 557-2707.
8. Get Involved – MBA Advocacy Month Carries on Through the End of September
Join MBA’s Legislative and Political Affairs (LPA) team during the remainder of September for MBA Advocacy Month, an all-member campaign focused on raising awareness on the top single-family and commercial/multifamily issues that can help produce positive policy changes at the national level.
• Why it matters: Through the end of next week, MBA will continue to work with members to engage with their employees and help run impactful Mortgage Action Alliance (MAA) and MORPAC campaigns. MBA staff has been hosting (virtual) events, including legislative townhall(s) and webinars, with a focus on how members can make their voices more effectively and better heard.
• What’s next: If interested in learning more and how to get involved before the end of the month, visit mba.org/advocacymonth.
For more information, please contact Jamey Lynch, AMP at (202) 557-2818.
9. Upcoming MBA Education Webinars on Critical Industry Issues
MBA Education continues to deliver timely single-family and commercial/multifamily 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:
• MCPI/Zone of Opportunity: Understanding the Demand Side of Mortgage Origination–Sept. 26
• An Overview of Regulatory Capital Requirements Proposed Revisions–Sept. 27
• From Policy to Practice–Fannie and Freddie’s New Radon Sampling Requirements–Oct. 5
• Private Credit Finance 101: A Commercial/Multifamily Overview of Debt Funds and Their Importance in the Capital Stack–Oct. 12
• Using Data Analysis as Part of a Strong Fair Lending Compliance Program–Oct. 24
MBA members can register for any of the above events and view recent webinar recordings by clicking here.
For more information, please contact David Upbin at (202) 557-2931.
