MBA Advocacy Update Sept. 14, 2020

Bill Killmer; Pete Mills

With Congress (most notably the Senate) unable to reach consensus on the passage of any additional COVID-related economic relief, MBA sent a letter last Tuesday to the CFPB responding to the Bureau’s proposed rule revising the General QM definition. The letter explains MBA’s support for the price-based QM construct, and offers several recommendations to help ensure the rule meets its stated goals of robust consumer protections and broad access to sustainable credit.

Last Wednesday, the Senate Banking Committee held a hearing on the Federal Reserve’s emergency lending facilities. And on Thursday, the FHA released Mortgagee Letter 2020-30, outlining guidance for situations in which borrowers seek new FHA-insured loans following resolution of a COVID-19-related forbearance.

1. CSBS Urges States to Extend Work from Home Permissions for Licensed Staff
On Friday the Conference of State Bank Supervisors (CSBS) publicly released an August 25 letter to their member state financial service regulators urging them to extend any current guidance or no action positions allowing licensed mortgage loan originators (MLOs) to work from home rather than from a licensed location.

Additionally, the Non-Depository Supervisory Committee (NDSC) asked those state regulators who have not issued such a public notice to consider allowing MLOs and other licensed employees to work temporarily from safe, unlicensed locations, or to adopt a no action position given specific consumer protection criteria defined in the letter are met. The letter reflects a vote of the NDSC to respond to the challenges IMBs face in the pandemic to keep their staff and their customers safe while still providing products and services.

In providing the rationale for this unusual move by the NDSC, the letter quotes July correspondence from MBA President and CEO Bob Broeksmit, CMB, to the CSBS and aligns with several specific recommendations for remote work standards made by MBA.

  • Why it matters: Because the authority to either extend existing guidance or issue no action letters rests with each state, the approval of the NDSC will a be a valuable and persuasive instrument in industry advocacy.
  • What’s next: MBA will be working individual state regulators, CSBS and partner state associations to address both short- and long-term solutions for remote work flexibility.

For more information, please contact Pete Mills (202) 557-2878 or William Kooper (202) 557-2737.

2. MBA Submits Comments on CFPB’s “QM Patch” Rule

On Tuesday, MBA filed comments responding to the Consumer Financial Protection Bureau’s (CFPB) proposed rule to amend the General QM definition by replacing the debt-to-income (DTI) ratio limit with a price-based approach. MBA’s comments express support for the price-based General QM standard given that loan price—measured by comparing a loan’s annual percentage rate to the average prime offer rate for a comparable transaction—is a strong indicator of a consumer’s ability-to-repay. MBA’s letter also recommends the Bureau adopt a 200-basis-point (bps) threshold for Safe Harbor QM, and suggests various other changes to better ensure the new QM standard provides compliance certainty.

  • Why it matters: The price-based General QM standard proposed by the CFPB will ensure broad access to credit, facilitate innovation, and protect consumers from unaffordable mortgages in the post-GSE Patch market. In addition, the proposed rule levels the playing field for non-GSE executions and eliminates reliance on the antiquated Appendix Q.      
  • What’s next: MBA expects the CFPB to issue a final rule by year’s end, and we will continue to engage on the CFPB’s price-based QM proposal and GSE Patch extension, while also preparing our response to the CFPB’s proposal to create a Seasoned QM loan definition—i.e., a new category of QM loan based on loan performance over a 36-month seasoning period. 

For more information, please contact Justin Wiseman at (202) 557-2854, Dan Fichtler at (202) 557-2780, or Blake Chavis at (202) 557-2930.

3. Senate Banking Committee Holds Hearing on Fed’s Emergency Lending Facilities

Lawmakers on the Senate Banking Committee largely agree that the Federal Reserve’s Main Street Lending Program (MSLP) has fallen short, but members lack consensus on whether – or how – to change the rules and allow the Fed to make more loans to struggling businesses. At Wednesday’s full committee hearing, policymakers differed over whether the Program can be strengthened with a new structure and relaxed loan terms, or if more direct aid from Congress is needed to help companies and individuals affected by the pandemic. A summary of the hearing can be found here.

  • Why it matters: As of last Thursday, the MSLP had completed $1.2 billion in loans, just a fraction of the $600 billion authorized in the CARES Act. Lawmakers also highlighted trouble in the commercial real estate industry, which has struggled from lockdown measures and rent deferrals. The program’s restrictive terms have made it hard for commercial real estate companies to get help, witnesses said, which has rippling consequences for the broader economy – from jobs to housing to state and local taxes.
  • What’s next: Congress remains divided over another round of stimulus. During the hearing, Democrats pushed for another round of funding that would include enhanced unemployment benefits, rental assistance, and aid to state and local governments. Republican committee members focused largely on the MSLP.

For more information, please contact Tallman Johnson at (202) 557-2866 or Ethan Saxon at (202) 557-2913.

4. FHA Releases Post-Forbearance Borrower Eligibility Requirements

On Thursday, the Federal Housing Administration (FHA) released Mortgagee Letter 2020-30, outlining guidance for situations in which borrowers seek new FHA-insured loans following resolution of a COVID-19-related forbearance. Borrowers who remained current during their forbearance are immediately eligible for new financing. Borrowers who skipped payments during their forbearance, but have since resolved their hardship and exited forbearance agreements, will require waiting periods of varying lengths based on loan type.

  • Why it matters: This guidance, which was released following persistent advocacy from MBA, provides needed clarity on post-forbearance financing options, and represents an important step towards ensuring that forbearance does not unnecessarily hinder a borrower’s access to credit.
  • What’s next: MBA will analyze the guidance and work with industry stakeholders and FHA as the new policies are implemented.

For more information, please contact Julienne Joseph at (202) 557-2782 or Hanna Pitz at (202) 557-2796.

5. MBA Calls for Further Action on Remote Work Options at NMLS Ombudsman Meeting

This week, the Nationwide Multistate Licensing System (NMLS) Ombudsman, Jim Payne, Director of Examinations and Assistant Deputy Commissioner for Consumer and Mortgage Lending in the office of the Kansas Banking Commissioner, held a virtual/online NMLS Ombudsman’s meeting to discuss licensing reforms in the age of COVID. The focus was exclusively on the need to maintain and extend current MLO permissions to work from other than a licensed location amidst an uncertain future. MBA’s Pete Mills participated in the meeting as a panelist along with MBA members and several state regulators. Mills urged these policy makers to: 1) consider the experience of the last several months as a unique “regulatory sandbox,” 2) collaborate with licensees to develop a common framework and best practices for remote work, and 3) avoid establishing 50 different standards for performing and overseeing remote work.

  • Why it matters: MBA’s letter to CSBS last month, which urged remote work permission to be extended through 2021, served as a key to frame the discussion upon which there was significant alignment of objectives.
  • What’s next: MBA will continue to engage with state regulators through the NMLS, CSBS and AARMR and urge them to work together to quickly develop consistent guidance and use the remote work discussion to facilitate a larger review of industry licensing.

For more information, please contact Pete Mills (202) 557-2878 or William Kooper (202) 557-2737.

6. Senate Fails To Advance Latest Pandemic Relief Legislation

On Thursday, Senate Democrats blocked Senate Republicans’ $300 billion COVID-19 aid package from advancing. The new “skinny” relief bill stalled in a 52–47 vote, falling short of the 60 votes needed to advance. All Republicans except Senator Rand Paul (R-KY) supported it. 

  • Why it matters: The new package from Senate Republicans would provide $300 in weekly federal jobless benefits through December 27, 2020, establish legal protections for businesses and health providers, add an infusion of funding for testing and vaccines, and provide new money for schools and child care.
  • What’s next: Both Republicans and Democrats have backed more relief, but have differed on the makeup of the package and the overall price tag. Talks over the summer between Democratic leaders and the Trump administration started to narrow the difference, with the White House settling around $1.5 trillion and Democrats at $2.2 trillion, before the negotiations stalled.

For more information, please contact Tallman Johnson at (202) 557-2866 or Ethan Saxon at (202) 557-2913.

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:

MBA members can access the list of recent webinar recordings by clicking here. For any questions, please contact David Upbin at (202) 557-2890.