MBA Advocacy Update–Dec. 21, 2020

December 21, 2020

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

On Monday, MBA – along with several trades – sent a letter to Treasury Secretary Steven Mnuchin expressing concerns regarding the possible release of the GSEs from conservatorship. On Wednesday, FHFA released a final rule extending the current single-family and multifamily GSE affordable housing goals by one year, through 2021.

Also last week, in a move that short circuits needed stakeholder input, FHFA directed the GSEs to revise their minimum liquidity requirements for non-depository seller/servicers. And, as of this writing, negotiations between congressional leaders on a COVID-19 response package and omnibus budget deal are expected to continue into the weekend.

1. MBA and Coalition Partners Warn Treasury to Avoid Market Disruptions in Addressing GSE Conservatorships

On Monday, MBA – along with the American Bankers Association, National Association of Home Builders, and the National Association of Realtors – sent a letter to Treasury Secretary Steven Mnuchin expressing concerns regarding the possible premature release of Fannie Mae and Freddie Mac (the GSEs) from conservatorship. The letter outlined possible market disruptions that could occur and suggested tangible actions that could be taken instead.

Why it matters: MBA has long advocated for reforms that would allow the GSEs to safely exit conservatorship. Releasing the GSEs before these reforms are firmly in place could undermine investor confidence, create volatility in the single-family and multifamily mortgage markets, and impede access to credit for consumers.
What’s next: MBA will continue to work with Treasury and the Federal Housing Finance Agency (FHFA) to support the ongoing efforts to implement reforms to the GSEs and move them closer to a state in which they can safely exit conservatorship.

For more information, please contact Sasha Hewlett at (202) 557-2805.

2. FHFA Finalizes One-Year Extension of Current GSE Affordable Housing Goals; Issues Advanced Notice of Proposed Rulemaking for 2022 and Beyond

On Wednesday, FHFA released a final rule extending the current single-family and multifamily GSE affordable housing goals by one year, through 2021. MBA previously submitted comments to FHFA supporting this action to allow for a better assessment of the economic landscape due to effects of the COVID-19 pandemic and resulting disruption to the U.S. economy. Concurrently, FHFA also released an advance notice of proposed rulemaking (ANPR) requesting comment from the public regarding the same affordable housing goals for 2022 and beyond. FHFA historically has set these affordable housing goals in three-year cycles.

Why it matters: MBA strongly supports efforts to ensure sustainable and affordable housing for low-income and very-low-income households, whether through homeownership or rental housing.
What’s next: Public comments on the ANPR are due by February 28, 2021. MBA will analyze the ANPR and work with members on potential feedback to FHFA.

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

3. FHFA Increases Minimum Liquidity Requirements for IMBs

As announced by the GSEs last week, the Federal Housing Finance Agency directed the GSEs to revise their minimum liquidity requirements for nondepository seller/servicers. Under this revision, IMBs’ unused and available portions of committed lines of credit no longer will be considered as a component of IMBs’ liquid assets. This update implements a change proposed by FHFA as part of a broader set of revisions to the net worth, capital, and liquidity standards for IMBs that are GSE seller/servicers, which was released in early 2020. That framework was withdrawn by FHFA in April, and is expected to be revised and released for comment before the end of the year.

Why it matters: The complete exclusion of unused and available portions of committed lines of credit will produce requirements that ignore a reliable source of liquidity for many IMBs. MBA previously submitted comments to FHFA on the reasons this change would be highly inappropriate. In these comments, MBA noted the committed nature of this funding and the importance of providing incentives for IMBs to obtain committed lines of credit. The implementation of this change by lender bulletin ( here and her e) short circuits the comment process on this very important element of the broader capital and liquidity framework.

What’s next: The updated requirements take effect on March 31, 2021. MBA has been in contact with FHFA and the GSEs to object to this process, and has asked that this provision be reattached to the broader framework and that stakeholder comments on it be evaluated and considered. MBA will continue its concerted efforts to improve existing counterparty requirements in place through the GSEs and Ginnie Mae, as well as those being developed by the Conference of State Bank Supervisors. MBA will submit detailed comments on the CSBS prudential framework for IMB servicers later this month.

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

4. FHFA Increases Minimum Liquidity Requirements for the GSEs

On Thursday, FHFA released a notice of proposed rulemaking to institute a new set of liquidity requirements for Fannie Mae and Freddie Mac. This proposal, which follows the recent finalization of the updated capital requirements for the GSEs, would include four measures of minimum liquidity – two based on expected cash flows and two based on long-term funding.

Why it matters: FHFA is proposing these policy changes as part of a broader effort to address safety and soundness considerations at the GSEs to facilitate their eventual exits from conservatorship. Much like the GSEs’ updated capital requirements, this liquidity framework will influence GSE business decisions and operations, which in turn could impact the broader mortgage market.
What’s next: Comments will be due on the proposed rule 60 days following its publication in the Federal Register, which should lead to a deadline in late February. The proposed rule includes an effective date of September 2021. MBA will analyze the proposed rule and respond with recommendations as needed.

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

5. Joint Trades Request CARES Act Forbearance Extension

On Thursday, MBA – along with ABA and the Housing Policy Council – sent a letter to FHFA, HUD, the Department of Veterans Affairs, the Department of Agriculture, Fannie Mae and Freddie Mac requesting they issue guidance establishing a consistent time frame for CARES Act forbearance. The letter highlights that as borrowers continue to be impacted by the COVID-19 pandemic, it is clear continued access to CARES Act forbearance is needed, and it asks the agencies for access to be extended through the National Emergency period.

Why it matters: Lack of a defined covered period has left servicers and borrowers confused over the extent of the effective period for initiation of CARES Act forbearances.
What’s next: MBA will continue to advocate for a defined covered period to bring increased certainty to borrowers and servicers.

For more information, please contact Sara Singhas at (202) 557-2826.

6. Congress Passes Bipartisan Veterans Assistance Legislation; Controversial Fee Increase for VA Refi Program Removed on Heals of MBA-Led Advocacy

This week both the House and Senate passed by voice vote H.R. 7105, the Johnny Isakson and David P. Roe, M.D. Veterans Health Care and Benefits Improvement Act of 2020, with an amendment. The bill heads to President Donald Trump’s desk, where he is expected to sign the measure into law. In addition to providing support for servicemembers and veterans affected by the COVID-19 pandemic, the bill expands VA home loan eligibility for individuals who performed full-time National Guard duty for at least 90 days, and provides lower fees for VA borrowers whose homes have been damaged by natural disasters.

Why it matters: A previous version of H.R. 7105 that passed the House in September included a 35-basis-point increase in funding fees associated with Interest Rate Reduction Refinance Loans (IRRRLs) guaranteed by the VA to pay for the increased benefits. MBA led an industry coalition opposing the inclusion of the fee increase, citing the higher borrowing costs imposed on veterans.
What’s next: Due to the targeted advocacy effort, Congress ultimately dropped the divisive IRRRL fee increase in favor of extending current origination fees, scheduled to expire in 2029, for one additional year through 2030. With the advent of a new Congress in January, MBA will continue its Capitol Hill outreach opposing new housing fee increases to pay for new programs.

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

7. Fannie, Freddie Guarantee Fees Little Changed in 2019

Earlier this week, FHFA released its annual report on guarantee fees charged by Fannie Mae and Freddie Mac. In aggregate, average g-fees increased from 55 basis points in 2018 to 56 basis points in 2019, with upfront g-fees decreasing slightly and ongoing g-fees increasing slightly. Similarly, g-fees were relatively stable from 2018 to 2019 when analyzed by product type, loan purpose, loan-to-value ratio, and credit score. The GSEs continued to charge relatively level g-fees across lenders with varying volumes of deliveries to the GSEs – an important element of MBA advocacy. Guarantee fees (unadjusted for product or risk mix) varied by only 1 basis point between the largest and smallest sellers.

Why it matters: The level and composition of GSE g-fees play a critical role in determining GSE competitiveness and market share across different products. Maintaining level g-fees across lenders of varying delivery sizes and profiles helps promote more equal access to the secondary market – in keeping with the GSEs’ public charters.
What’s next: MBA remains actively engaged with FHFA and other stakeholders regarding further reforms to the GSEs. This work includes both safety and soundness reforms to ensure a stable market, as well as market conduct reforms that address the GSEs’ activities and operations.

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

8. Conference of State Bank Supervisors Joins with Others to Develop Fraud-Prevention Resource for Mortgage Companies

On Wednesday, CSBS, the Bankers Electronic Crimes Task Force, and the U.S. Secret Service jointly issued a ransomware self-assessment tool intended to assist nonbank financial institutions in their efforts to fight against electronic fraud.

Why it matters: According to CSBS, the document is a banking industry tool adapted for use by nonbanks and contains “important controls that ALL types of companies should use to assess their efforts to mitigate risks associated with ransomware and to identify opportunities for increasing security.” The tool kit will allow companies to engage in accurate and timely assessments, which will help management and the board of directors gauge the entity’s preparedness to identify, protect, detect, respond, and recover from a ransomware attack. Assessment results could also assist third parties (such as auditors, security consultants, and regulators) that might also review the entity’s security.

8. Conference of State Bank Supervisors Joins with Others to Develop Fraud-Prevention Resource for Mortgage Companies

Why it matters: According to CSBS, the document is a banking industry tool adapted for use by nonbanks and contains “important controls that ALL types of companies should use to assess their efforts to mitigate risks associated with ransomware and to identify opportunities for increasing security.” The tool kit will allow companies to engage in accurate and timely assessments, which will help management and the board of directors gauge the entity’s preparedness to identify, protect, detect, respond, and recover from a ransomware attack. Assessment results could also assist third parties (such as auditors, security consultants, and regulators) that might also review the entity’s security.
What’s next: CSBS is encouraging nonbank institutions, including mortgage companies, to add this document to their library of fraud-prevention resources

For more information, or to join MBA’s Fraud Issues Committee, please contact Fran Mordi at (202) 557-2860

9. MBA Releases Draft Model State Bill and Rule for Work-from-Home/Licensing Reform Campaign

This week, MBA’s State Legislative and Regulatory Committee released a draft model bill and regulation that seeks to broadly modernize state licensing requirements for the real estate finance industry. The language balances the need for operational flexibility with prescribed regulator standards for consumer and data protection, and will be the focus of an MBA campaign in 2021 in state capitals.

Why it matters: During the COVID-19 pandemic, IMBs 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. However, at the end of the year, the guidance in a multitude of states is set to lapse. Modernizing these laws would not only apply the lessons of the pandemic to anachronistic state mandates, but also help prepare the industry and regulators for any future health crisis or natural disaster.
What’s next: MBA will be working with its state partner associations to seek passage of the model language in states that require licensed activity to be performed from a licensed location/branch. MBA will continue to collaborate with the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators to secure broad acceptance. MBA members can track progress and get involved in this effort by visiting our licensing flexibility resource center at www.mba.org/LicensingFlexibility.

For more information, please contact William Kooper at (202) 557-2737 or Kobie Pruitt at (202) 557-2870.

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:

Where Do I Start? Implementing D&I in Your Company – January 11
Ten Things Your Company Must Do in 2021 – January 13
Expanding Homeownership to Close the Racial Wealth Gap – January 15
Engaging Borrowers in Today’s Digital Environment – January 19
Best Execution Analysis in the Secondary Mortgage Market – January 26

MBA members can register for any of the above events and view recent webinar recordings by clicking here.

For any questions, please contact David Upbin at (202) 557-2890.

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