House Passes MBA-Supported VA Securitization, Financial Literacy Bills

The House approved two bills yesterday, strongly supported by the Mortgage Bankers Association, which clarify when Department of Veterans Affairs home loans qualify to be pooled into Ginnie Mae securities, as well as legislation that would increase access to housing counseling for consumers.

H.R. 1988 and S. 1749, both known as the Protecting Affordable Mortgages for Veterans Act of 2019, cleared the House by voice vote under suspension of rules. H.R. 2162, the Housing Financial Literacy Act of 2019, was also approved by voice vote.

H.R. 1988 (https://www.congress.gov/bill/116th-congress/house-bill/1988), sponsored by Reps. David Scott, D-Ga., Lee Zeldin, R-N.Y., Mike Levin, D-Calif., and Andy Barr, R-Ky.; and S. 1749 (https://www.congress.gov/bill/116th-congress/senate-bill/1749), sponsored by Sens. Krysten Sinema, D-Ariz., and Thom Tillis, R-N.C., clarifies when Department of Veterans Affairs home loans qualify to be pooled into Ginnie Mae securities. Specifically, the bill allows the 210-day seasoning period to begin on the first payment due date of the initial loan, which MBA Senior Vice President of Legislative and Political Affairs Bill Killmer said will allow lenders greater compliance certainty and better ensure that loans are not erroneously pooled into Ginnie Mae securities going forward.

S. 1749 cleared the Senate by voice vote in June; H.R. 1988 was reported favorably out of the House Financial Services Committee and the House Veterans Affairs Committee in May.

H.R. 2162 (https://www.congress.gov/bill/116th-congress/house-bill/2162), introduce by Rep. Joyce Beatty, R-Ohio, would H.R. 2162 would require HUD to discount mortgage insurance premium payments for those first-time homebuyers that complete a HUD-approved housing counseling program prior to completing the purchase of a home.

“MBA applauds the House of Representatives for today passing both H.R. 1988 and S. 1749, the Protecting Affordable Mortgages for Veterans Act of 2019,” Killmer said. “MBA looks forward to President Trump signing S. 1749 into law.”

Ahead of yesterday’s votes, MBA sent a letter to House leadership urging the bills’ passage. MBA noted H.R. 1988 fixes a glitch in the Economic Growth, Regulatory Relief, and Consumer Protection Act (Public Law 115-174), signed by President Trump last May. Section 309 of the Act, “Protecting Veterans from Predatory Lending,” sought to address the problem of mortgage loan churning targeted at service members and veterans. This section instituted new requirements that refinanced loans must meet in order to be eligible for a guaranty by VA, as well as for Ginnie Mae pooling.

MBA noted calculation of the 210-day seasoning period in Section 309(a), however, deviated from well-understood seasoning requirements already in place through directives issued by Ginnie Mae. The new requirements of Section 309(a) begin the seasoning period on the date on which the first payment is made by the borrower. In many situations, the lender offering the refinance cannot know this date with certainty-particularly if the lender is not the servicer of the initial loan. H.R. 1988 corrects this problem by beginning the 210-day seasoning period on the first payment due date of the initial loan, which will allow lenders greater compliance certainty and better ensure that loans are not erroneously pooled into Ginnie Mae securities.

“Importantly, nothing in this legislation weakens the consumer protections that were put in place through the original legislation,” MBA said. “The bill would also provide the added benefit of ensuring the Ginnie Mae eligibility of re-performing VA refinance loans that are bought out of pools as servicers consider loss mitigation options.”

Similarly, MBA expressed support for H.R. 2162. “MBA has long advocated for increased access to housing counseling as a means to provide a more positive experience for first-time homebuyers unfamiliar with the homeownership process, as well as for other underserved communities,” MBA said. “While MBA conceptually supports the goals of this bill, including improving financial literacy and making homeownership more attainable, MBA also recommends that any legislative change to FHA’s premium structure maintain HUD’s discretion to set insurance premiums that are consistent with actuarial evidence accepted by HUD.

The bills now go to President Trump, who is expected to sign them into law.