MBA Advocacy Update
With congressional majorities now settled and the Biden-Harris Inauguration Day looming, on Thursday the Treasury Department and the Federal Housing Finance Agency released an amendment to the Preferred Stock Purchase Agreements governing the conservatorships of Fannie Mae and Freddie Mac. Importantly, the revisions do not call for the premature release of the GSEs from conservatorship, heeding the concerns MBA had raised in recent weeks about potential market disruptions from a rushed exit.
Last Friday, MBA was joined by the Housing Policy Council on a comment letter to the VA in response to its proposed temporary partial claim program. And last week, FHFA announced it would extend GSE origination flexibilities through February 28.
1. Treasury and FHFA Amend Terms of GSE Conservatorships
On Thursday, the Treasury Department and the Federal Housing Finance Agency released an amendment to the Preferred Stock Purchase Agreements governing the conservatorships of Fannie Mae and Freddie Mac. This amendment to the PSPAs was widely expected, as the GSEs were nearing the point at which they would no longer be permitted to build their capital reserves. MBA President and CEO Bob Broeksmit, CMB, released a statement in which he commended MBA-supported policy reforms in the amendment to the PSPAs, while also noting that certain elements of the amendment must be further analyzed to determine their market impact.
- Why it matters: MBA has engaged in extensive advocacy in recent months to ensure that any amendments to the PSPAs would not disrupt the mortgage market through a premature release of the GSEs from conservatorship. This outcome was successfully avoided, and Treasury and FHFA also put in place several key policy reforms supported by MBA, such as a prohibition on favorable pricing or variances for lenders based on their size, charter type, or volume of loans delivered to the GSEs. The terms of the amendment also may have implications for the GSEs’ acquisitions of certain types of loans – particularly investor loans, second homes and loans with risk layering – but those provisions do not appear to fundamentally alter the GSEs’ presence in the market. MBA is most concerned with a provision limiting lender deliveries to the cash window to $1.5 billion per GSE over a rolling 52-week period, which could force some lenders into MBS or aggregator channels that are not their preferred execution. A preliminary review the PSPA amendments can be found here.
- What’s next: The cash window provisions are not effective until January 2022, and MBA will be seeking revisions to this arbitrary cap. The GSEs will continue to build their capital reserves and adapt to the various requirements set forth in the amendments to the PSPAs. Treasury will report to Congress by September 30, with further details on ways in which its investment in the GSEs can be restructured to facilitate an end to the conservatorships while ensuring taxpayers are compensated appropriately.
2. President-Elect Biden Proposes Nearly $2T Relief Package
On Thursday, President-elect Joe Biden announced the “American Rescue Plan” to provide COVID-19 vaccinations and additional economic assistance. The proposed $1.9 trillion legislation includes a broad array of new federal funding, small-business support, and specific measures that impact housing. The proposal extends the eviction and foreclosure moratoriums and continues applications for forbearance on federally guaranteed mortgages until September 30.
The proposal does not expand mortgage forbearance requirements to non-government-backed loans. It proposes a total of $35 billion in housing assistance comprised of $25 billion in rental assistance, $5 billion to cover home energy and water costs and arrears, and $5 billion for homelessness assistance. The proposal includes a $1,400-per-person check for working families, extends current unemployment insurance benefits and eligibility, and provides a $400 supplement until the end of the fiscal year. It also provides grants to more than 1 million of the hardest-hit small businesses and leverages $175 billion for additional small-business lending and investment.
- Why it matters: Biden has indicated that this proposal will be his first legislative priority, and it demonstrates that continued economic assistance will be forthcoming in response to the COVID-19 emergency. The proposal repeatedly identifies the importance of housing as part of the economic recovery and states that “more than 10 million homeowners have fallen behind on mortgage payments. Failing to take additional action will lead to a wave of evictions and foreclosures in the coming months.”
- What’s next: Like previous COVID-19 emergency funding proposals, the Biden plan will first have to be introduced as legislation by the House and then reach bipartisan agreement on its final form to pass the Senate with a 60-vote threshold. During these negotiations, the funding package and its housing-related provisions could see significant changes.
3. MBA Submits Comments on Proposed VA Partial Claim
Last Friday, MBA, along with the Housing Policy Council, submitted comments to the Department of Veterans Affairs in response to its proposed temporary Veterans Assistance Partial Claim Payment program for VA borrowers impacted by the COVID-19 pandemic. The letter highlights structural issues with the program and raises concerns that, without changes, the program will result in a negative borrower experience. MBA and HPC provide suggestions on ways to improve the proposed VAPCP, specifically by combining the proposed partial claim with the previously implemented VA deferral option.
MBA also submitted separate comments with a coalition of other trades and community groups illustrating high-level issues with the proposed VAPCP.
- Why it matters: MBA has long advocated for a VA partial claim program similar to the FHA program; however, the VAPCP as proposed provides little benefit to VA borrowers or servicers.
- What’s next: MBA will continue to work with the VA to improve the proposal and develop a viable partial claim program.
4. FHFA Extends COVID-19-Related Origination Flexibilities
This week, the Federal Housing Finance Agency announced it would extend Fannie Mae and Freddie Mac origination flexibilities through February 28. The origination flexibilities include temporary policies related to appraisals, employment verification, and power of attorney, which allow transactions to occur in a safer manner that avoids person-to-person contact.
- Why it matters: Further extending these flexibilities helps to temporarily relieve uncertainty for market participants and brings additional stability to the housing market as the economy continues to be heavily impacted by the effects of the COVID-19 pandemic.
- What’s next: MBA will continue to advocate for longer-term extensions of pandemic-related flexibilities for the duration of the pandemic to ensure smooth market functioning.
For more information, please contact Sasha Hewlett at (202) 557-2780.
5. MBA Meets with NYDFS Staff on Climate Change Memorandum
On Monday, MBA and the New York MBA were invited to provide feedback to the New York Department of Financial Services regarding its October 30, 2020, memorandum on climate-risk mitigation. Under the memorandum, NYDFS expects regulated organizations to integrate climate change risk into their governance frameworks, enterprise risk management processes, and business strategies. MBA recommended that NYDFS immediately engage with the federal housing programs and the GSEs, which MBA learned did not take place prior to the issuance of the memorandum. MBA also expressed concern about the potential for the new policy to create a disparate impact on minority and immigrant communities that are already disproportionately exposed to higher risk from climate change. Additionally, MBA noted that no company-specific climate risk mitigation plans can be successful without long-term reforms of the National Flood Insurance Program.
- Why it matters: NYDFS regulates a significant number of MBA members and its actions on climate risk are likely to influence other regulators.
- What’s next: MBA will work with the New York MBA to continue to engage with NYDFS, and will be submitting a letter outlining the industry’s broad concerns in greater detail.
6. URLA Implementation Required by March 1–MBA to Host Readiness Webinar
On January 20, MBA will host a webinar to convey lessons learned from lenders that have already implemented the new Uniform Residential Loan Application (URLA). The webinar will feature business and technology leaders from lending institutions who will share their experiences when implementing the URLA.
- Why it matters: Use of the new URLA and automated underwriting system (AUS) delivery specifications are mandatory for GSE loans for all loan applications on or after March 1, 2021.
- What’s next: MBA will continue to collaborate with its members, the GSEs, and the federal housing agencies to resolve issues that arise.
7. Upcoming and Recent 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 and recent webinars – which are complimentary to MBA members:
- Engaging Borrowers in Today’s Digital Environment – January 19
- URLA: Lessons Learned from Early Adopters – January 20
- Best Execution Analysis in the Secondary Mortgage Market – January 26
- MISMO Data Governance and Management Charter Template – January 26
- The State of the Mortgage Industry: Building a Sustainable Operating Model for 2021 and Beyond – January 28
- The State of the Non-QM Market – February 2