MBA Advocacy Update
On Wednesday, President Trump and Congress agreed to a Continuing Resolution that funds the federal government through mid-December and reauthorizes the National Flood Insurance Program through September 30, 2021.
On Thursday, the Conference of State Bank Supervisors released a proposal to update recommended prudential standards for state regulators to apply to IMB servicers. Following the announcement, MBA President and CEO Bob Broeksmit, CMB, released a statement urging state regulators to adhere to uniform standards that align with existing GSE and other federal requirements.
Last week, the Financial Stability Oversight Council issued a statement describing the results of its review of the secondary mortgage market. On Thursday, MBA filed comments responding to the Consumer Financial Protection Bureau’s proposed rule creating a new QM category (Seasoned QMs) for loans that meet certain performance requirements over a 36-month seasoning period.
Also on Thursday, the House narrowly passed a truncated COVID-19 relief package as a marker for ongoing bipartisan negotiations between House Speaker Nancy Pelosi (D-CA) and Treasury Secretary Steven Mnuchin.
1. CSBS Proposes New Prudential Standards for IMB Servicers
On Thursday, the Conference of State Bank Supervisors released a proposal seeking stakeholder comments on prudential standards for state regulators to apply to independent mortgage bank servicers. The new proposed standards, if adopted by the states, could lead to a uniform framework rather than a patchwork of different state requirements. The CSBS recommends “baseline standards” for all IMB servicers, and enhanced standards for a small number of larger or more complex IMB servicers.
The baseline capital and liquidity thresholds align with those put in place by the Federal Housing Finance Agency and the GSEs, though they would also apply to private-label servicing as well. Additional standards in the proposal focus on risk management, data integrity and protection, corporate governance, and servicing transfers, among others. MBA President and CEO Bob Broeksmit, CMB, released a statement on the CSBS proposal.
- Why it matters: State regulators are the primary prudential regulators of IMBs, and the standards implemented in the states will influence the operations of all IMB servicers. It is critically important that actions taken by state regulators are uniform, well-calibrated, and aligned with the standards put in place by FHFA and the GSEs, Ginnie Mae, and the Consumer Financial Protection Bureau.
- What’s next: MBA will work closely with members to develop thorough comments on this proposal. CSBS is seeking public comment by December 31.
For more information, please contact Pete Mills at (202) 557-2878.
2. FSOC Call for Higher GSE Capital Requirements
Late last week, the Financial Stability Oversight Council – a group comprising the heads of the major financial regulators – issued a statement describing the results of its review of the secondary mortgage market. In its statement, FSOC described potential financial stability risks that could result from stress at the GSEs (Fannie Mae or Freddie Mac), and recommended that capital requirements be set in a manner largely consistent with the proposed requirements recently issued by FHFA.
- Why it matters: In August, MBA provided detailed comments on FHFA’s proposal. While MBA applauded FHFA’s recognition that a revised capital framework for the GSEs is necessary, MBA’s comments noted several key flaws with the proposal. These concerns focused on the transparency of the framework, the role of the leverage ratio in setting aggregate capital requirements, the punitive treatment of credit risk transfer offerings, and the potential increases in financing costs for borrowers. Left unaddressed, these flaws could result in excessively high capital requirements and a procyclical framework that could raise costs and undermine stability.
- What’s next: MBA will work with FHFA and many other FSOC member agencies as further reforms of the GSEs are considered and implemented. FHFA will continue to review the public feedback on its proposed capital requirements for the GSEs, with a final rule expected as early as year end.
For more information, please contact Dan Fichtler at (202) 557-2780.
3. House Passes Second Iteration of HEROES Act; Parallel Efforts on a Bipartisan Relief Package Continue
On Thursday, the House narrowly passed H.R. 8406, a modified and truncated version of the previously House-passed HEROES Act. The bill represents the latest efforts by Democrats to pass additional COVID-19-related relief (albeit at a reduced cost of roughly $2 trillion), and it includes housing provisions like emergency rental/homeowner financial assistance, and expanded forbearance requirements for servicers. Notably, this “HEROES 2” package also contains a provision identical to the language of H.R. 6794, legislation offered by Rep. Juan Vargas (D-CA) and House Financial Services Committee Chair Maxine Waters (D-CA) that would prohibit the GSEs and the Federal Housing Administration from applying punitive pricing schemes on early payment forbearance loans. MBA sent a letter to the House thanking leaders for including the Vargas language within the package, while raising the industry’s other substantive concerns regarding the revised bill.
- Why it matters: HEROES 2 – which was passed along largely partisan lines by a vote of 214-207 – is a negotiating proffer from House Democratic leaders, as Speaker Nancy Pelosi (D-CA) engages with Treasury Secretary Mnuchin on another potential COVID-19-related stimulus package. As 18 Democrats voted against final passage of the measure (not one Republican voted for it), Speaker Pelosi may face increased pressure to narrow remaining differences with Mnuchin and the administration.
- What’s next: Conversations between Mnuchin and Pelosi are expected to continue into early next week, as vulnerable Republican Senators and moderate House Democrats place pressure on their respective leaderships to finalize a package – and compromise on wedge issues like unemployment insurance, state/local government aid, and legal liability.
4. MBA Responds to the CFPB’s Seasoned QM Loan Proposal
On Thursday, MBA filed comments responding to the CFPB’s proposed rule creating a new QM category (Seasoned QMs) for loans that meet certain performance requirements over a 36-month seasoning period. MBA’s comments express support for the Seasoned QM proposal, which, along with the new General QM rule, will expand access to credit and encourage innovation. MBA’s letter recommends that the Bureau modify the proposal’s portfolio retention requirements, allow subordinate-lien loans to qualify under the Seasoned QM category, and extend Seasoned QM eligibility to loans originated prior to the rule’s effective date. MBA also recommends that loans originated and sold to a portfolio lender should also qualify for seasoned QM status if they meet the required performance standards.
- Why it matters: The opportunity to achieve QM safe harbor protections should increase creditors’ willingness to make non-QM or rebuttable presumption QM loans, thereby expanding access to credit. Similarly, the Seasoned QM proposal will encourage the development of new underwriting techniques, by rewarding those that prove successful, as demonstrated by strong loan performance, with QM safe harbor protections
- What’s next: MBA will continue to engage on the CFPB’s efforts to reform its QM rule, including their new proposed General QM rule, proposed GSE Patch Extension, and Seasoned QM proposal.
5. FHFA, GSEs Add New Language Resources to ‘Mortgage Translations’ Clearinghouse
On Wednesday, FHFA announced additions of Vietnamese, Korean and Tagalog language resources within its Mortgage Translations clearinghouse. These new resources build on the existing Spanish and traditional Chinese resources to provide further support for borrowers with limited English proficiency. FHFA and the GSEs also added information regarding oral interpretation services that support more than 250 languages.
- Why it matters: The Mortgage Translations clearinghouse represents an important effort by FHFA and the GSEs – in collaboration with industry, consumer, and government stakeholders – to assist lenders, servicers, counselors, and others in serving LEP borrowers. The clearinghouse features frequently-used documents, glossaries, and education materials in the five non-English languages listed above.
- What’s next: FHFA and the GSEs will continue to develop the clearinghouse by adding new documents, resources, and other materials in the coming months and years.
6. MBA, Coalition Partners Urge FCC to Address Erroneous Call Blocking and Call Mislabeling
On Tuesday, MBA and a coalition of financial services trade groups submitted reply comments in the Federal Communications Commission’s recent TRACED Act rulemaking. The coalition’s comments ask the FCC to require voice service providers to “establish a real-time notification requirement to inform callers that their calls have been blocked or adversely labeled,” and to require service providers to resolve blocking and labeling disputes within 24 hours.
- Why it matters: Overbroad call blocking and inaccurate call labeling obstructs legitimate callers’ communication efforts, including those of mortgage servicers, and deprives consumers from receiving time-sensitive, critical information relevant to their financial well-being.
- What’s next: MBA will continue to engage the FCC on matters related to TRACED Act implementation.
7. Federal Banking Agencies Publish Final Rule Allowing Lenders to Defer Appraisals and Evaluations Until After Closing
On Tuesday, the U.S. Treasury, the Federal Reserve System and the Federal Deposit Insurance Corp. published a final rule that temporarily defers appraisal and evaluation requirements for up to 120 days after the closing of certain residential and commercial real estate transactions.
- Why it matters: On April 14, the banking agencies released an interim final rule on Real Estate Appraisals amending agency regulatory requirements to allow for deferment of appraisals for up to 120 days post-closing.
- What’s next: The final rule becomes effective once it’s published in the Federal Register and will expire on December 31.
For more information, please contact Julienne Joseph at (202) 557-2782.
8. House Financial Services Committee Holds Hearing on OCC’s Chartering Authority
On Tuesday, the House Financial Services Committee’s Task Force on Financial Technology held a hearing on the Office of the Comptroller of the Currency’s proposals to charter non-depository lending and payment processing institutions. The OCC’s proposal (which has been endorsed by the Trump administration) has faced legal challenges from state regulators, as it was originally conceived by Treasury officials during the Obama era. The Task Force also explored the utility of Industrial Loan Company charters, with some Democrats lamenting the thin line between banking and commerce, and another bipartisan group of Task Force members supporting modernization of the federal chartering process as a means to encourage innovation.
- Why it matters: Despite the legal uncertainty surrounding the proposal, MBA will continue to closely monitor ongoing discussions regarding the OCC proposal, as it may potentially offer certain IMBs an avenue to pursue access to a federal charter.
- What’s next: With the Committee’s primary focus being COVID-19 relief efforts, it is unclear if this topic will receive further consideration this year or during the next Congress.
9. Governors Extend Current Pandemic-Related Protection Policies
Recently, governors in California, Oregon and New York have extended polices regarding eviction and mortgage forbearance protections through the end of 2020. Last Thursday, California Governor Gavin Newsom issued an executive order on allowing local governments to continue banning commercial evictions until March 31, 2021. Earlier this week, New York Governor Andrew Cuomo announced he would extend the eviction protections of the state’s Tenant Safe Harbor Act for those suffering financial hardship during the COVID-19 pandemic. On Tuesday, Oregon Governor Kate Brown signed a new moratorium preventing residential evictions for non-payment and for certain no-cause evictions until December 31, 2020. Earlier in the year, the Oregon Legislature passed House Bill 4213, establishing a residential and commercial eviction moratorium through September 30, 2020.
- Why it matters: These actions were anticipated, as all these policies were set to expire at the end of September.
- What’s next: MBA will work with its state association partners to monitor the use of such sweeping gubernatorial authority and engage as necessary.
10. 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:
- The Nuevo Latino Consumer: Build Awareness and Your Bottom Line – October 5
- Ensuring a Robust Cyber Risk Training Program for Your Mortgage Operations – October 7
- LIBOR Transition and Legal Issues for CRE Finance – October 8
- MISMO: Introduction to the Uniform Closing Instructions Templates – October 14
- LIBOR Transition for Loan Originators – October 15
- Fast-track Your Employment and Income Verifications – October 15
- Introduction to USDA’s No Down-payment Loans – October 22