MBA Advocacy Update–Dec. 7, 2020

Bill Killmer bkillmer@mba.org; Pete Mills pmills@mba.org.

Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell testified last week before House and Senate committees providing an update on CARES Act oversight. In both hearings, Mnuchin addressed the future of the GSEs, and stressed that they should not be released from conservatorship until each has sufficient capital.

On Wednesday, HUD announced FHA’s forward mortgage loan limits and reverse mortgage maximum claim amount limits for 2021. And last Monday, several coordinated announcements addressed and altered the expected timelines associated with the transition away from LIBOR.

1. Powell, Mnuchin Testify on CARES Act, GSE Reform 

On Tuesday and Wednesday, Treasury Secretary Steve Mnuchin and Federal Reserve Chair Jerome Powell appeared before the Senate Banking Committee and the House Financial Services Committee as part of their quarterly CARES Act updates. In the Senate, Senator Mike Rounds (R-SD) asked a question on the future of the GSEs; Mnuchin reiterated his support for housing reform but noted that the GSEs should have “appropriate” levels of capital before being released. Powell echoed Mnuchin’s point that he would like to see the GSEs return to private hands over time and the housing finance system stand on its own with significant private capital backing it.

 In the House, Chair Maxine Waters (D-CA) lamented in her opening statement that the financial regulators were unreasonably rushing a release of the GSEs. In response to a question from Rep. William Timmons (R-SC), Mnuchin offered a scenario in which the GSEs could be released somewhere between the capital they currently hold and the full capital requirement within the Federal Housing Finance Agency’s 2020 final rule, where they are released subject to a consent order.   

• Why it matters: As the regulators and Treasury continue to explore the best options to release the Enterprises from conservatorship, the concern over any abrupt or premature releases could impact liquidity in the housing markets and beyond.   
• What’s next: Democrats and Republicans in Congress seem unified on the need for a well-thought-out and comprehensive strategy to capitalize the GSEs, but the role of legislators and the current or future administration could all have a hand in the selected course of action.   

For more information, please contact Tallman Johnson at (202) 557-2866, Ernie Jolly at (202) 557-2741, or Borden Hoskins at (202) 557-2712.

2. HUD Announces 2021 FHA Loan Limits 

On Wednesday, HUD announced the Federal Housing Administration’s forward mortgage loan limits and reverse mortgage maximum claim amount limits for 2021. Following median home price increases of 7.42 percent over the past year, the floor for loan limits in low-cost areas rose to $356,362, while the ceiling for loan limits in high-cost areas rose to $822,375 (both figures for one-unit properties). The maximum claim amount for reverse mortgages also will be $822,375.

• Why it matters: These significant increases reflect rapid home-price appreciation over the past year. Per the National Housing Act, FHA calculates loan limits through a formula that tracks median home prices, with the low-cost area loan limits set at 65 percent of the conforming loan limit, and the high-cost area loan limits set at 150 percent of the conforming loan limit.
• What’s next: The new loan limits will be effective for case numbers assigned on or after January 1, 2021, through December 31, 2021.

For more information, please contact Hanna Pitz at (202) 557-2796.

3. LIBOR Administrator Proposes Updated Transition Timelines; U.K. and U.S. Regulators Clarify Expectations

On Monday, several coordinated announcements addressed and altered the expected timelines associated with the transition away from LIBOR. ICE Benchmark Administration, the administrator of LIBOR, announced that it is consulting on its plans to cease publication of U.S. Dollar LIBOR. ICE proposes to discontinue only the 1-week and 2-month USD LIBOR tenors on December 31, 2021, while all other USD LIBOR tenors would cease publication on June 30, 2023. The U.K. Financial Conduct Authority, the regulator of LIBOR, issued a statement supporting ICE’s consultations and the potential for extended timelines to address legacy LIBOR-indexed contracts. In the United States, the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. issued a joint statement that also bifurcated expectations for new and legacy contracts – noting that the additional time would allow many legacy contracts to mature while cautioning against the use of LIBOR for new contracts beyond December 31, 2021.

• Why it matters: If ICE moves forward with its proposed timelines following its consultations, the market will have its clearest indications yet of the timeline for publication of various USD LIBOR tenors. While the extended timeline will allow a smoother path for institutions to address legacy contracts, the statements from U.K. and U.S. regulators indicate that institutions should continue moving forward with plans to use alternatives to USD LIBOR for new contracts. Go here for more information and resources on the LIBOR transition.
• What’s next: MBA has been an active participant in the Alternative Reference Rates Committee and has engaged with many regulators on different elements of the transition, working to ensure a transition that does not disrupt markets or expose market participants to undue litigation risk.

For more information, please contact Dan Fichtler at (202) 557-2780.

4. FSOC Releases Annual Report on Financial System Conditions, Risks, and Vulnerabilities

On Thursday, the Financial Stability Oversight Council released its 2020 annual report on the status of the financial system. This report, which covers a wide array of markets, products, and institutions, also provides financial regulators’ views on risks and vulnerabilities, as well as recommendations to address these concerns. Much of the report focused on the impact of the COVID-19 pandemic, with key passages on the housing finance system reflecting both the strength and resiliency of the market throughout the year, and the fragilities exposed by the pandemic.

• Why it matters: The FSOC annual report provides indications of the top policy priorities for many of the federal and state regulatory agencies. The annual report issued last year contained an extended discussion of potential risks posed by independent mortgage banks, though the discussion of these risks was more subdued this year, with an emphasis on coordination and collaboration between regulators. FSOC also noted risks related to commercial real estate exposures, reliance on repo funding by some market participants, the transition away from LIBOR and “low-for-long” interest rates.
• What’s next: Several of the FSOC members are likely to change in the coming months due to the transition to a new administration, though many of the priorities noted in the annual report are likely to remain in focus into 2021 and beyond. MBA will continue to work with each of the FSOC member agencies on policies to promote a robust housing finance system.

For more information, please contact Dan Fichtler at (202) 557-2780.

5. Ginnie Mae Updates Applicant Eligibility Requirements

Earlier today, Ginnie Mae announced updates to its eligibility requirements for institutions seeking approval for new issuer status. These updates codify criteria that Ginnie Mae has been introducing into its new issuer reviews in recent years in an effort to provide greater transparency to prospective applicants. These updates include a new requirement that the institution has held Federal Housing Administration approval for at least three years, as well as new requirements demonstrating the institution has at least two years of corporate servicing experience (direct management or through a subservicer) and a monthly average of $250 million in its servicing portfolio during the 12 months prior to application.

• Why it matters: These policy changes clarify more thorough requirements for those institutions seeking Ginnie Mae issuer status, though they do not introduce new requirements for institutions that already are Ginnie Mae issuers.
• What’s next: These updated eligibility requirements are effective immediately, applying to both prospective applications and those pending approval. MBA will analyze these requirements and work with its members to develop any responses or comments to Ginnie Mae.

For more information, please contact Dan Fichtler at (202) 557-2780.

6. Ginnie Mae Announces New Pool Type for Buy-outs of Loans in Forbearance

Following its prior decision to institute pooling restrictions for loans in forbearance that were subsequently bought out of pools, Ginnie Mae on Friday issued details on a new pool type for the resecuritization of these loans. The C RG Pool is a new Ginnie Mae II custom pool that will be composed exclusively of loans that entered forbearance after March 1; were bought out of pools after July 1; retain the same rate and terms (i.e., were not modified); and are current (i.e., not 30-plus days past due). These loans are ineligible for any other type of Ginnie Mae pooling, per the restrictions announced in June.

• Why it matters: The pooling restrictions put in place by Ginnie Mae aimed to align buy-out activity with efforts to assist struggling borrowers and concerns regarding security prepayment speeds. MBA has worked closely with Ginnie Mae to refine the parameters of these restrictions to ensure they minimize costs placed on issuers. The development of the new custom pool type was an expected step to implement the previously announced changes.
• What’s next: The C RG Pool is available for securities with an issue date of February 1, 2021, and later. Issuers will need to ensure their file layout and data entry processes support the new custom pool type.

For more information, please contact Dan Fichtler at (202) 557-2780.

7. MBA Responds to CFPB’s Request for Information on the Equal Credit Opportunity Act

On Tuesday, MBA filed comments in response to a Consumer Financial Protection Bureau request for information the Equal Credit Opportunity Act. MBA’s comment letter provides recommendations on a variety of ECOA topics, including disparate impact, limited English proficiency, special purpose credit programs, affirmative advertising to disadvantage groups, sexual orientation and gender identity discrimination, questions of state pre-emption, public assistance income, and artificial intelligence and machine learning.

• Why it matters: MBA’s comments offer suggestions on ways to expand minority homeownership opportunities, reduce regulatory uncertainty, and develop viable solutions to compliance challenges under ECOA.
• What’s next: MBA will continue working with the CFPB to update ECOA in a way that better reflects today’s lending technologies and the increasing diversity of the borrower population in the United States. 

For more information, please contact Justin Wiseman at (202) 557-2854, Lucia Jacangelo at (202) 557-2941, or Blake Chavis  at (202) 557-2930.

8. Massachusetts Court Rules in Favor of Lender

On November 25, the Massachusetts Supreme Judicial Court issued its opinion in Thompson v. JPMorgan Chase. Consistent with arguments made in an amicus brief filed by MBA, the court found that the lender’s compliance with a state law that provided borrowers with a more favorable reinstatement period than the reinstatement period provided under the terms of the mortgage contract did not render a subsequent foreclosure sale void.

• Why it matters: The court’s ruling should provide much-needed clarity to lenders operating in Massachusetts.
• What’s next: MBA will continue to monitor this matter as the case returns to the First Circuit for a likely resolution dismissing plaintiff’s claims. 

For more information, please contact Justin Wiseman at (202) 557-2854, Lucia Jacangelo at (202) 557-2941, or Blake Chavis  at (202) 557-2930.

9. HUD Extends FHA COVID-19-Related Origination Guidelines

On November 27, HUD extended until December 31, FHA’s ability to endorse loans to borrowers who entered into forbearance due to COVID-19-related hardship post-closing. HUD also extended through December 31, temporary changes in underwriting requirements for borrowers relying on self-employment income and rental income, as well as temporary guidance related to the administration of escrow accounts for 203(k) borrowers.

• Why it matters: Last month, HUD extended the deadline for borrowers to request an initial six-month COVID-19 forbearance until December 31, without extending the scheduled November 30, 2020, expiration of policy outlined in ML 2020-16 allowing for endorsement of loans to borrowers who requested forbearance after closing. This corresponding extension aligns with MBA advocacy efforts. Lenders should note that the indemnification requirements associated with these loans remain in effect.
• What’s next: MBA will continue to advocate for the extension of endorsement flexibilities for borrowers who enter forbearance post-closing as long as HUD extends the ability for borrowers to request initial COVID-19-related forbearance. MBA also will continue to work with lenders and HUD to ensure sufficient clarity on temporary requirements related to the verification of self-employment or rental income.

For more information, please contact Hanna Pitz at (202) 557-2796.

10. D.C. Council Passes AMC Legislation to Permanently Require Licensure 

On Tuesday, the Washington D.C. Council passed B23-0445, which makes permanent the emergency licensing regime put in place last year to regulate appraisal management companies (AMCs) in the District in compliance with requirements of the Dodd-Frank Act.

• Why it matters: The District’s current AMC licensing law was scheduled to lapse at the end of the year if the Council did not act and pass B23-0445. Lenders employ cost-saving entities like AMCs because they help facilitate the use of the federal government’s affordable housing programs. These programs are essential to expanding housing opportunity in the challenging Washington, D.C., housing market, which has become even more acute since the onset of the pandemic.   
• What’s next: B23-0445 will now be transferred to Mayor Muriel Bowser for her signature.

For more information, please contact Kobie Pruitt at (202) 557-2780.

11. MBA Launches Work-from-Home/Licensing Reform Campaign

MBA launched a new web resource center – www.mba.org/LicensingFlexibility – last week to provide resources for MBA members seeking additional clarity and information regarding state regulator guidance allowing mortgage loan originators to work outside a licensed location during and after the pandemic. The page will include links to MBA activity, key documents, and relevant regulator pages, including appropriate NMLS system materials. In the weeks ahead, the resource center will include language for model legislation and regulations that seek to modernize licensing requirements more broadly for the real estate finance industry.

• Why it matters: During the COVID-19 pandemic, independent mortgage bankers received permission from state regulators for their licensed staff to work from home temporarily in states that require members of their teams to operate from a licensed location. These guidance documents and “no action” letters allowed the real estate finance industry to continue to function and serve consumers during the national crisis. However, at the end of the year, the guidance in a number of states is set to lapse without a clear path to safely allowing individuals to return to a normal work environment that does not expose them to unnecessary health risks. MBA has worked directly with regulators and the Conference of State Bank Supervisors to secure ongoing remote-work flexibility for next year, and has also initiated discussions for longer-term flexibility that reflects the successes and best practices developed during the pandemic.
• What’s next: On December 17, at 2:00 p.m. EST, MBA’s State Legislative and Regulatory Committee will facilitate a rollout of MBA’s campaign to modernize licensing for real estate finance companies and professionals. Meeting participants will have the opportunity to review and comment on model legislation and regulation developed to provide the industry with flexibility and legal certainty.

For more information or to participate in the December 17 call, please contactWilliam Kooper at (202) 557- 2737 or Kobie Pruitt at (202) 557-2870.

12. 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:

• Joint Industry Borrower Outreach Campaign: “Not OK? That’s OK” – January 9
• Leadership During Crises and Transitions – December 10
• Mortgage Market Developments and Becoming a Public Company – December 14
• MISMO: Introduction: Uniform Closing Instructions Templates – December 15
• What’s New with RESPA: CFPB’s Guidance and Business Practices – December 16
• Small Balance Lending in Today’s Market – December 17

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) 557-2890.

13. mPact’s Fall Fundraisers: Join In and Give Back

Each fall, mPact host a series of fundraisers to support the MBA Opens Doors Foundation, which provides mortgage and rental assistance to families caring for a critically ill or injured child. A percentage of the total sales of each virtual event is donated to the Foundation. Below is a list of upcoming mPact events.

• Yoga: Live stress-free – December 7
• Cook Like a Pro: Step away from Cup O’Noodles – Tuesday, December 8
• Music and Chill: Tune into a virtual music event – Wednesday, December 9
• Mixology and Magic: Relax and have fun – Thursday, December 10

To view and register for upcoming events, click here. For more information, please contact Krystal Thomas at (202) 557-2726.