MBA Advocacy Update Aug. 16 2021
Early Wednesday morning, the Senate voted along party lines to adopt a $3.5 trillion budget resolution framework for fiscal year 2022, another step toward the crafting of the actual tax provisions – including a possible minimum book tax that would impact mortgage servicing rights values – that will offset the cost of President Joe Biden’s broad infrastructure package.
On Tuesday, the Senate voted 69-30 to approve a bipartisan, $1.2 trillion “hard” infrastructure deal, which extends a Fannie/Freddie guarantee “pay-for” until 2032. On Monday, MBA submitted detailed comments highlighting its concerns with proposed changes to Ginnie Mae’s capital, liquidity, and net worth requirements for single-family issuers. And Thursday, HUD and FHFA entered into a collaborative agreement on fair housing and fair lending coordination.
Finally, we encourage you to participate in a new DEI survey, run by McLagan. See below for more information.
1. Senate Adopts $3.5 Trillion Budget Resolution Framework
On Wednesday, the Senate voted along party lines to adopt a $3.5 trillion budget resolution framework for fiscal year 2022, following a lengthy “vote-a-rama” debate on amendments. As previously reported, congressional Democrats are pursuing a dual-track strategy to pass major infrastructure and economic legislation, and this reconciliation package will allow Democrats to enact key Biden administration priorities left out of the $1 trillion bipartisan deal that the Senate passed earlier this week. The framework includes “historic” levels of proposed investments in public, green/sustainable, and affordable housing, which will be offset by a series of proposed tax changes, including several that directly impact the real estate industry.
- Why it matters: During the “vote-a-rama” debate, Sens. Steve Daines (R-MT), John Thune (R-SD) and John Kennedy (R-LA) offered amendments regarding the small-business “pass-through” deduction, “stepped-up” basis provisions, and 1031 like-kind exchanges, respectively. These amendments urging preservation of current tax treatment of these provisions passed with bipartisan support. While the amendments (and underlying resolution) carry no force of law, they do offer directional insight to the various committees as they begin to craft the legislative text to implement tax increases, tax credits, and spending increases. Senate Majority Leader Chuck Schumer (D-NY) gave committees a September 15 target deadline to develop their portions of the bill.
- What’s next: The $3.5 trillion framework now heads to the House, with lawmakers scheduled to return during the week of August 23 to consider the resolution and trigger the reconciliation process. MBA will continue to advocate with the Biden administration and on Capitol Hill against any possible threat to real estate finance markets as the reconciliation process advances. In the meantime, Mortgage Action Alliance (MAA) members need to take action to urge Congress to preserve industry tax priorities that support real estate investment.
2. Senate Passes Bipartisan Infrastructure Bill
On Tuesday, the Senate voted 69-30 to approve the Infrastructure Investment and Jobs Act (H.R. 3684), which focuses on investments in bridges, roads, railways, and broadband. It does not include investments that the Biden administration has referred to as “human infrastructure,” including affordable housing provisions or tax provisions that impact real estate. Democrats plan to address those priorities separately in a reconciliation package.
- What it matters: MBA and Mortgage Action Alliance opposition efforts successfully defeated a harmful amendment offered by Sens. Chuck Grassley (R-IA) and Patrick Leahy (D-VT) that would have made significant changes to the False Claims Act. Grassley and Leahy can be expected to attempt to attach their amendment to other moving legislative vehicles before year’s end. Despite industry pushback, a MAA Call to Action, and a failed amendment offered by Sen. Mike Lee (R-UT) to repeal the use Fannie Mae and Freddie Mac guarantee fees (“g-fees”) as a source of funding offsets, the final package did include an extension of the 10-basis-point increased level of g-fees through 2032 to raise an estimated $21 billion.
- What’s next: The bipartisan legislation now goes to the House, where Speaker Nancy Pelosi (D-CA) has made clear she will not bring the bill to the floor until the Senate passes the broader reconciliation package this fall. MBA will continue to oppose any attempts at legislative or regulatory change pertaining to the FCA that would reduce access to credit and lead to higher costs of Federal Housing Administration-insured financing for first-time, low-to-moderate-income, and minority homebuyers.
3. MBA Details Concerns with Ginnie Mae Proposal to Revise Capital, Liquidity and Net Worth Requirements; RFI Deadline Extended
Last week, MBA submitted extensive comments to Ginnie Mae in response to its Request for Input on updated issuer capital, liquidity and net worth requirements. MBA highlighted its significant concerns with the proposed introduction of a risk-based capital ratio requirement that features harsh treatment of issuers’ mortgage servicing rights. In its letter, MBA discussed the potentially adverse impact that this requirement could have on issuers, the MSR market and consumers. MBA also issued several recommendations for Ginnie Mae and other federal and state agencies that would improve financial resiliency in a more effective manner.
- Why it matters: Introduction of a risk-based capital ratio requirement is a novel approach to Ginnie Mae’s oversight of issuers, and needs thorough analysis and back-testing before its implementation should be considered. If this requirement were put in place for 2021 reporting, it could destabilize markets rather than serve to strengthen financial resiliency.
- What’s next: Late Thursday, Ginnie Mae announced that it has extended the deadline for responses to the RFI to October 8. In tandem with its announcement of the extended comment period, Ginnie Mae also confirmed that it will reconsider its proposed 2021 implementation of these new requirements, as well as pursue alignment with the efforts being undertaken by the Federal Housing Finance Agency (FHFA) and the Conference of State Bank Supervisors. Both of these developments are directly responsive to recommendations made by MBA in its comments on the RFI. MBA will continue its advocacy to ensure any changes adopted by Ginnie Mae are appropriately calibrated and implemented on a reasonable timeline.
For more information, please contact Dan Fichtler at (202) 557-2780.
4. Fannie Mae to Include Rental Payment History in Underwriting Process
On Wednesday, the Federal Housing Finance Agency announced Fannie Mae will update Desktop Underwriter to provide the ability to consider borrower rental payment history in the risk assessment process. The updated functionality will allow lenders – with permission from borrowers – to use bank statement data to identify 12 months of consistent rent payments. The update will feature only positive rental history data; missed or inconsistent payments will not be considered.
- Why it matters: Fannie Mae noted that it expects this policy to responsibly expand access to mortgage credit, as many consumers would benefit from a more accurate view of their histories of meeting housing payment obligations. The ability to factor rental payment history into loan underwriting also aligns with long-standing MBA recommendations to better recognize the complete population of mortgage-ready consumers.
- What’s next: The new DU functionality will be effective beginning September 18. MBA currently is reviewing the details of this policy and will remain in contact with both FHFA and Fannie Mae as it is implemented. MBA will continue its ongoing work to promote broad access to credit in a safe and sound manner.
5. HUD, FHFA Enter Agreement Concerning Fair Housing and Fair Lending Coordination
On Thursday, HUD Secretary Marcia Fudge and FHFA Acting Director Sandra Thompson entered into a Memorandum of Understanding aimed at enhancing their respective agencies’ enforcement of the Fair Housing Act and strengthening oversight of Fannie Mae, Freddie Mac and the Federal Home Loan Banks. The MOU provides a framework for cooperation between HUD and FHFA to further the purposes of the Fair Housing Act “by promoting information sharing, coordination on investigations, compliance reviews, and the ongoing monitoring of the Enterprises.”
- Why it matters: The MOU will allow greater collaboration between HUD and FHFA as they work to ensure the Enterprises operate in a manner that is consistent with their responsibilities under the law. This agreement reflects the Biden administration’s strong focus on fair housing and fair lending.
- What’s next: MBA will review the details of the MOU to determine its scope and any implications for lenders or servicers that operate as counterparties to the Enterprises.
6. Key Tax Writers Introduce Revised Biden Minimum Book Tax Proposal
On Monday, Sens. Elizabeth Warren (D-MA) and Angus King (I-ME), and Rep. Don Beyer (D-VA) introduced a revised version of President Biden’s minimum book tax proposal. The Real Corporate Profits Tax Act of 2021 would impose a new 7% minimum tax on book income for companies earning $100 million in annual net income. The Biden administration originally proposed a 15% MBT with a $2 billion net income threshold. The lawmakers are pushing to include the bill as a “pay-for” in the reconciliation package.
- Why it matters: This proposed MBT, though intended to compel large multinational corporations to pay a more equitable effective tax rate, would apply to MBA member firms holding mortgage servicing rights that currently defer taxation (under present law) on those assets until accompanying mortgage payment income is received. Smaller mortgage firms not directly subject to the MBT would still be impacted by the resulting “downstream” MSR pricing volatility the proposal would create, absent a housing carveout.
- What’s next: Sen. Warren and Rep. Beyer serve on the congressional tax-writing committees and are well-positioned to push to include some version of their MBT proposal in the House/Senate reconciliation package this fall. Though MBA will continue its direct lobbying efforts, Mortgage Action Alliance members need to take action — on this issue and others – to urge Congress to vindicate our industry tax priorities.
7. FFIEC Issues Guidance on Authentication and Access to Financial Institution Services and Systems
On Wednesday, the Federal Financial Institutions Examination Council issued guidance that provides financial institutions with examples of effective authentication and access risk management principles and practices for customers, employees and third parties accessing digital banking services and information systems.
- Why it matters: The FFIEC is focused on the risks associated with cybersecurity threats to financial institutions, including authentication of parties attempting to access the systems of these organizations. It is providing examples of certain practices to assist organizations in combating these threats.
- What’s next: MBA regularly will provide information to members about evolving cybersecurity threats as well as guidance issued by regulators and cybersecurity experts.
For more information, please contact Rick Hill at (202) 557-2718.
8. Wisconsin Department of Financial Institutions Issues Extension of Remote Work Guidance
The Wisconsin Department of Financial Institutions issued new guidance that allows mortgage loan originators and other employees of licensed mortgage bankers and mortgage brokers to continue to work from locations other than a licensed location. The new guidance will replace the state’s pandemic-related no-action position.
- Why it matters: The remote work provisions of the Wisconsin DFI guidance are consistent with MBA’s model and that of other states that permit remote work. Importantly, MBA members should note that the DFI is requiring the mortgage banker, broker, or registered entity sponsoring an MLO to notify the DFI ( DFIMortgageBanking@wi.gov) of the MLO’s intent to work remotely and maintain a list of MLOs who elect to work away from a licensed branch location.
- What’s next: The new guidance will become effective on October 15, and will remain in place until it is changed or withdrawn by the DFI. MBA will continue to work with state and local association partners to advocate for its model legislation and regulation for licensing flexibility. In addition, MBA is asking members to provide any information on legislative or regulatory efforts in their state that would allow remote work by contributing to a Google spreadsheet that will be used to update the information on MBA’s resource center. If you do not have access to a Google account, please contact Kobie Pruitt and he will provide you with a digital copy of the spreadsheet to fill out.
For more information, please contact Kobie Pruitt at (202) 557-2870.
9. Participate in the New Diversity, Equity and Inclusion (DEI) Study
Sign up today to participate in a new offering to MBA members: the Diversity, Equity and Inclusion (DEI) Study. The study is separately designed and compiled for both the residential and commercial/multifamily sides of the real estate finance industry, and is administered by world-class human resources advisory firm McLagan, a part of Aon plc. All participating companies are encouraged to complete as many sections of the study template as possible on the following topics: Policy and Initiatives; Headcount by Mortgage Job Function; Headcount by EEO-1 Categories; and Headcount by Movement.
- Why it matters: Over the past year, racial and gender inequalities have shaped our nation’s conversation, and MBA remains committed to supporting our member companies by developing actionable solutions. We have been engaged with our staff and leaders in the real estate finance industry on how we can eliminate racial and gender inequalities within the industry – both from the perspective of lending and servicing to borrowers as well as staffing our own organizations. Participation in this study will give our industry a baseline from which to improve and to see how member companies compare to the industry as a whole.
- What’s next: Registration and participation in the study is required in order to receive the results. Individual company data will be kept confidential in accordance with McLagan’s high standards. As a bonus, MBA members save $1,000 off the regular survey pricing. The general timeline is provided in the registration form, with data due back to McLagan in mid-September and results released in October.
For specific information about the DEI study, please email Dave Rosenthal at McLagan or call (203) 326-4349. For general questions, please contact MBA Research members Marina Walsh at (202) 557-2817 or Jamie Woodwell at (202) 557-2936.
10. Are You a Diversity Champion? Apply for MBA’s DEI Leadership Awards
MBA’s DEI Leadership Awards are back! Now in its sixth year of recognizing MBA member companies, this awards program acknowledges the dedication and creativity that increase DEI efforts within a company’s leadership and employee base. If your organization is a champion of diversity, share how you are inspiring change and highlight your success by applying today.
- What’s next: Applications are due August 20, 2021. Prior to getting started, please review application tips to help you prepare your entry.
For more information, please contact MBA’s DEI Team.
11. Upcoming 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 webinars – which are complimentary to MBA members:
- Commercial/Multifamily: Core and Non-Traditional Sector Outlooks and Mortgage Risk – August 17
- Bank-Owned Mortgage Divisions: What Bankers Need to Know to Manage Mortgage Banking – August 26
- Budgeting and Financial Planning for Non-Believers – September 9
- Introduction and Walkthrough of MISMO’s Enhanced Logical Data Dictionary (LDD) – October 6
MBA members can register for any of the above events and view recent webinar recordings. For more information, please contact David Upbin at (202) 557-2890.