MBA Advocacy Update Aug. 9 2021

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

Last week the Senate Banking Committee held a hearing on several housing nominees, including Julia Gordon to be HUD’s Assistant Secretary of Housing and FHA Commissioner. In other FHA news, the agency released formal waivers of provisions in two recent Mortgagee Letters that would have required servicers to halt forbearance exit reviews and re-review borrowers that already have viable home retention plans in process.

On Tuesday, the Committee held a hearing featuring testimony from key financial regulators. Yesterday, the CFPB released an interpretive rule to assist the mortgage industry in determining whether to treat June 19, 2021, as a federal holiday or a business day for purposes of compliance with certain time-sensitive borrower protections. And the Senate rushed to conclude its August work on a bipartisan infrastructure agreement as a prelude to a tax and budget reconciliation debate.

1. Senate Banking & Housing Committee Holds Hearing on Housing Nominees

On Thursday, the Senate Banking & Housing Committee held a hearing on the nominations of Julia Gordon, to be HUD’s Assistant Secretary of Housing and Federal Housing Administration Commissioner, David Uejio, to be HUD’s Assistant Secretary for Fair Housing and Equal Opportunity, and Solomon Greene, to be HUD’s Assistant Secretary Policy Development and Research. Several senators referenced MBA’s support for Gordon’s nomination in their remarks. A summary of the hearing can be found here.

Chairman Sherrod Brown, D-Ohio, mentioned the importance of mortgage forbearance for FHA borrowers and in her response, Gordon said, “We’ve proven we can get assistance out, rapidly and effectively. I do feel like that is what we have done in this crisis so far. Coming up, what we’ve also learned is that having the right tools in place is only half the battle. The other half of the battle is execution. The role that mortgage servicers have to play in keeping people in their homes cannot be overstated. These are relationships I have built for years. I understand mortgage servicing deeply and I believe I can help manage through this crisis, so that no family loses their home unnecessarily.”

Prior to the hearing, Ranking Member Pat Toomey, R-Pa., sent a letter, signed by all Republican committee members, calling into question Greene and Gordon’s qualifications to serve based on their past public statements. While addressing these statements took up much of the hearing, the nominees were also able to address significant housing policy issues such as the rising cost of homeownership and foreclosure prevention. In response to a question from Sen. Tina Smith, D-Minn., Gordon stated her intent to work on improving small dollar mortgages, valuations and appraisals and zoning reforms to increase the housing supply. After Sen. Catherine Cortez Masto, D-Nev., raised the need for more housing in Nevada, helping first-time homebuyers and addressing housing inequality, Gordon responded, “We can be creative and all work together. The lending industry is powerfully interested in these questions, and I believe we are positioned to bring together an unprecedented coalition of stakeholders to work together on these important issues.”

• Why it matters: If confirmed, the three nominees will play leading roles in implementing the Biden agenda for regulating housing finance. The hearing revealed a shared interest in helping to ensure single-family borrowers who use FHA loans remain competitive in a very active housing market.
• What’s next: The partisan divide over all three nominations indicates a slower path to their Senate confirmation, with committee votes likely to occur only after the August recess.

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

2. FHA Releases Partial Waivers for ALM Home Retention Option

On Thursday, FHA released two partial waivers for specific timing requirements of the recently announced FHA COVID-19 Advance Loan Modification. The waivers release servicers from the requirement they re-review borrowers for the ALM if they had not already sent final loss mitigation documents before June 25, 2021.

• Why it matters: In issuing the partial waivers, FHA acknowledged the concerns raised by the industry that the re-review requirements could delay loss mitigation options and confuse borrowers that had already worked with their servicers on a viable forbearance exit option. The release of these waivers allows servicers to focus resources on assisting borrowers who do not already have a viable loss mitigation option.
• What’s next: MBA will continue to engage with FHA on COVID-19 policies to ensure borrowers have access to effective end-of-forbearance home retention options, and that servicer operations are not burdened with unnecessary program changes that impair service quality to borrowers.

For more information, contact Darnell Peterson at (202) 557-2922.

3. MBA Leads Coalition Partners in Opposition to False Claims Act Amendment Within Infrastructure Negotiations

On Friday, Senators Chuck Grassley, R-Iowa, and Patrick Leahy, D-Vt., introduced an amendment for consideration within the Senate’s Bipartisan Infrastructure Framework negotiations (H.R. 3684). Although not intended for this specific purpose, the Grassley/Leahy amendment makes significant changes to the False Claims Act, creating disruptions in the housing market and complicating efforts to work with the private sector to distribute COVID-related rental and homeowner assistance. MBA is sending a letter with coalition partners to the lead Senate BIF negotiators expressing our opposition to the amendment and outlining the detrimental legal and lending implications of this amendment should it be included in the final package. 

• Why it matters: Expediting the inclusion of this amendment absent the due diligence of congressional hearings, testimony or sufficient legal analysis to determine its impact on housing credit availability will undoubtedly create unintended consequences, including increased risk of exposure to penalties for MBA members.
• What’s next: The Senate is expected to begin voting on the BIF package as early as tomorrow afternoon. MBA will continue to lead in opposition to this amendment, but it will be critical that Mortgage Action Alliance (MAA) members take action TODAY to oppose consideration of this proposed amendment. We need you to contact your Senators through MAA and urge them to oppose the consideration of the Grassley/Leahy Amendment (No. 2435) as part of the BIF negotiations.

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

4. Financial Regulators Testify Before Senate Banking & Housing Committee

On Tuesday, the Senate Banking & Housing Committee held a hearing titled, “Oversight of Regulators: Does our Financial System Work for Everyone?” The Committee heard from the leadership of the Office of the Comptroller of the Currency, Federal Deposit Insurance Corp. and the National Credit Union Association. Senators focused their comments and questions around efforts to: (1) promote financial inclusion; (2) regulate financial technology (fintech) while enabling innovation; (3) modernize the Community Reinvestment Act (CRA); and (4) address future risks to the financial system. Chairman Sherrod Brown, D-Ohio, asked whether the OCC agrees with the Federal Reserve’s commitment to a comprehensive CRA modernization, questioning what the timeline of action may be. Acting Comptroller Michael Hsu affirmed the agency’s commitment and stated there is “a lot of urgency,” though the timing remains in flux. Ranking Member Pat Toomey, R-Pa., also asked Hsu to commit to retaining principles of “clarity, objectivity, and transparency” in its CRA updates — which he did. Sen. Bob Menendez, D-N.J., advocated for more diversity among senior leadership, not just new hires. He questioned whether the regulators had internal goals on voluntary diversity reporting under the CRA, which all witnesses noted that they did not have.

• Why it matters: The regulators outlined their respective actions and the financial sectors’ resilience in light of the COVID-19 pandemic, as well as highlighted their ongoing initiatives to ensure the financial system works for everyone.
• What’s next: MBA will continue to monitor congressional hearings for indications of future legislation or regulatory actions that impact our members.

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

5. CFPB Issues Interpretive Rule on Certain Mortgage and Disclosure Timing Requirements for the 2021 Juneteenth Federal Holiday

On Thursday, the Consumer Financial Protection Bureau released an interpretive rule to resolve uncertainties surrounding the treatment of June 19, 2021, (Juneteenth) for purposes of certain timing requirements found in Regulation Z.

Why it matters: To determine the length of the rescission period for closed-end mortgages and the TRID disclosure delivery timing requirements, whether June 19, 2021, counts as a business day or federal holiday depends on when the relevant time period began. If the relevant time period began:

• On or before June 17, 2021, then June 19 was a business day.
• After June 17, 2021, then June 19 was a federal holiday.

Additionally, the interpretive rule explains that creditors are not prohibited from providing longer time periods than required, so if a time period began on, or prior to, June 17, 2021, creditors could still treat June 19, 2021, as a federal holiday. A MBA-prepared summary of the interpretive rule is available here.  

For more information, contact Justin Wiseman (202) 557-2854.

6. MBA Submits Comments on GSE Executive Compensation Policies

MBA submitted recommendations to the Federal Housing Finance Agency in response to its request for input on executive compensation policies at Fannie Mae and Freddie Mac as well as the Federal Home Loan Banks. The letter emphasizes the need to strike the appropriate balance between the GSEs (1) offering a level of compensation that will attract and retain talented executives with industry expertise; and (2) implementing a compensation structure with incentives that encourage prudent risk management and financial stewardship. The GSEs should also be permitted to offer attractive compensation packages that are competitive with similar private sector entities. This includes being required to structure the compensation in a manner that is aligned with the GSEs’ public interest goals: safe and sound operations and a continued focus on affordable housing duties and missions.

• Why it matters: Establishing appropriate executive compensation is essential to retaining human capital and reducing turnover among senior officials at the GSEs and could help promote innovation and contribute to the organizational stability.
• What’s next: MBA will continue to engage with the new FHFA leadership on this topic and other important housing finance issues.

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

7. CFPB Keeps November FDCPA Effective Date

On July 30, the CFPB announced that it would not be extending the implementation date for the Fair Debt Collection Practices Act final rules as suggested in its April Notice of Proposed Rulemaking. The NPRM would have extended the implementation date for the FDCPA final rules announced in October and December of 2020 by 60 days. When proposed, the CFPB cited the ongoing COVID-19 pandemic and the predicted influx of borrowers exiting forbearance as the reason for the extension and wanted to allow stakeholders additional time to review and implement the final rules. After reviewing industry comments, the CFPB deemed the extension was not needed, which directly contradicted the recommendations of MBA and other financial trades that supported the extension.

• Why it matters: The FDCPA final rules announced in October and December 2020 set servicer-borrower contact restrictions regarding call frequency, limited content messages, and emails, in addition to setting credit reporting requirements.
• What’s next: The FDCPA final rules will go into effect on November 30, 2021, as originally planned in the 2020 final rules. MBA will continue to engage with the CFPB to ensure member concerns are voiced.

For more information, contact Darnell Peterson at (202) 557-2922.

8. Illinois Releases Advance Notice of Proposed Rulemaking on CRA for State Regulated Companies

Recently, the Illinois Department of Financial and Professional Regulation released a notice requesting input on a series of questions related to the implementation of the state’s recently enacted CRA law. The questions were included in an Advance Notice of Proposed Rulemaking (ANPR), which seeks input on the general provisions, as well as on specific reinvestment provisions for state chartered banks, credit unions and nonbank mortgage lenders. MBA will work with its member companies and other partners to offer comments that will mitigate the impact and burden of the proposed CRA mandates. 

• Why it matters: Illinois is the second state, after Massachusetts, to enact legislation imposing CRA requirements on nonbanks. Similar legislation is also pending in New York. MBA believes CRA for IMBs is inappropriate, since they do not take in deposits to reinvest; do not have access to direct government support; already engage in sustainable lending in LMI communities; and are subject to robust oversight and supervision in every state they operate, as well as from federal regulators.
• What’s next: Comments are due November 23, 2021, and IDFPR is also holding a series of public meetings to seek input. MBA will work with its member companies and state and local partners to engage on the Illinois regulation as well as on any other state or federal attempt to impose CRA mandates on nonbanks.

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

9. NYDFS Superintendent Lacewell Announces New Initiative to Promote Diversity and Inclusion

Recently, New York Department of Financial Services Superintendent Linda Lacewell announced that the NYDFS intends to implement a state initiative to increase diversity at New York regulated banking and non-depository institutions. During the summer, the NYDFS will send a survey to New York financial institutions to collect data related to the gender, racial and ethnic makeup of a company’s board and senior management team from December 31, 2019, and 2020. Superintendent Lacewell has indicated that the goal of the survey is to increase transparency and allow companies to assess where they stand compared to their peers as it relates to diversity.

• Why it matters: The survey will be sent to all New York regulated banking institutions with more than $100 million in assets, and all regulated non-depository financial institutions with more than $100 million in gross revenue.
• What’s next: NYDFS plans to collect the surveyed data and publish the results on an aggregate basis in the first quarter of 2022. The information will be categorized by the type of institution and other relevant factors. MBA will work with the New York MBA to share any industry concerns regarding the data collection with the NYDFS.

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

10. Fewer Households Missed Housing Payments in the Second Quarter of 2021

On Wednesday, MBA’s Research Institute for Housing America released a second-quarter 2021 update of its study, “Housing-Related Financial Distress During the Pandemic.” The study contains innovative household survey data on rent, mortgage, and student loan payment patterns from the Understanding America Study, an internet panel survey of over 8,000 households specially tailored to analyze the impact of the pandemic.

• What it says: Slightly under 5 million households did not make their rent or mortgage payments in the second quarter of 2021. 8.6% of renters (2.86 million households) missed, delayed, or made a reduced payment in June 2021, while 4.6% homeowners (2.19 million) missed their mortgage payment. In addition, 28 million student debt borrowers (44.8%) missed payments, up from 26 million in March. 
• Edward Seiler, Executive Director, RIHA, and MBA’s Associate Vice President, Housing Economics, said, “Homeowners’ employment situation and ability to make their mortgage payments has meaningfully improved since the onset of the pandemic. Most homeowners still behind on their payments are in a mortgage forbearance plan. For those still facing hardships once their forbearance plan expires, loan modifications, payment deferrals, and loan payoffs – through either refinancing or a home sale – are all options that could prevent a foreclosure.” 

For more information, contact Eddie Seiler at (202) 557-2739.

11. 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 13, 2021. Prior to getting started, please review application tips to help you prepare your entry.

For more information, contact MBA’s DEI Team.

12. 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:

• Compliance Considerations Before and After a Data Breach – August 10
• C-PACE Financing 101: A Commercial/Multifamily Lender’s Overview – August 12
• 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.