MBA Advocacy Update: Jan. 11, 2021

Bill Killmer; Pete Mills

On Tuesday, the Federal Housing Finance Agency released the final 2021 Underserved Markets Plans for the GSEs under the Duty to Serve program. On Monday, MBA submitted comments in support of a proposed rule on supervisory guidance issued by a group of federal financial regulators.

Also last week, MBA submitted comments to the Conference of State Bank Supervisors on its proposed prudential framework for IMB servicers. And on Wednesday, MBA President and CEO Bob Broeksmit, CMB, released a statement on last week’s violent events at the U.S. Capitol.

1. MBA Provides Recommendations on State-Level Prudential Standards for IMB Servicers

Following in-depth analysis of the Conference of State Bank Supervisors’ (CSBS) proposed “prudential framework” for independent mortgage bank (IMB) servicers, MBA submitted detailed comments to CSBS in late December. MBA’s recommendations focused on several critical areas, including improved calculations that would more accurately reflect IMBs’ financial strength, the importance of alignment between federal and state standards, and the need for coordinated implementation across state regulators.

  • Why it matters: State regulators are the primary regulators of IMBs, and the standards implemented in the states will influence the operations of all IMB servicers. It is important that actions taken by state regulators are well-calibrated and aligned with the standards put in place by the Federal Housing Finance Agency (FHFA), Fannie Mae, Freddie Mac, Ginnie Mae, and the Consumer Financial Protection Bureau (CFPB). The CSBS framework is vital to securing uniform standards and to preventing a balkanized system of capital and liquidity rules if each state were to proceed independently.
  • What’s next: MBA will work closely with CSBS staff as they refine this proposal and consider steps to facilitate broad, uniform adoption by state regulators. FHFA is expected to release proposed revisions to the net worth, capital and liquidity requirements for IMBs that service Fannie Mae or Freddie Mac loans in the coming weeks. MBA’s comment letter urged CSBS to work with the industry to ensure that the federal guidelines to be issued by the FHFA are appropriately calibrated to the IMB business model. 

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

2. MBA Provides Comments on Framework for New GSE Activities and Products 

On Friday, MBA submitted comments to FHFA in response to its notice of proposed rulemaking (NPR) on new Fannie Mae and Freddie Mac (GSE) activities and products. For several years, MBA has advocated for a more transparent process by which the GSEs develop new activities and products or undertake pilots. MBA appreciated that the NPR aims to clarify the process by which potential new single-family and multifamily GSE products are evaluated and ensures valuable opportunities for public input. MBA was generally supportive of the proposed rule, while offering technical recommendations and emphasizing the importance of innovation along with the need for transparency, efficiency, and the protection of proprietary information.

  • Why it matters: As the GSEs continue to partner with other market participants to develop innovative new activities and products, it is important that the processes by which these measures are undertaken are fair, transparent, and supportive of the overall market.
  • What’s next: MBA will continue to work with FHFA as the rule is finalized, and support the development of new GSE activities and products in an appropriate manner.

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

3. FHFA Allows GSE ‘Early Payment Forbearance’ Flexibility to Expire

In late December, FHFA confirmed to MBA that it would not extend the Fannie Mae and Freddie Mac (GSE) policy flexibility allowing them to purchase qualified loans that are in forbearance. The December 21, 2020, expiration of this policy, which was not formally announced, eliminates the ability of the GSEs to purchase loans that enter forbearance after closing but prior to delivery. MBA had urged FHFA to align with recent U.S. Department of Housing and Urban Development (HUD) guidance (see HUD news item below) that extended FHA’s authority to insure loans in early forbearance through the end of March 2021. The prior ability of the GSEs to purchase “early payment forbearance” loans, while still subject to onerous pricing adjustments, provided a “floor price” for the market and served as an important source of liquidity for lenders.

  • Why it matters: Without this policy flexibility, lenders are exposed to greater risk as they navigate an economy and a market still impacted by the effects of the COVID-19 pandemic. As market participants react – particularly in the correspondent lending channel – this could result in further constraints on credit availability and liquidity.
  • What’s next: MBA will continue to advocate for FHFA to reinstate this policy and permit the GSEs to purchase qualified loans that are in forbearance to ensure smooth market functioning for the duration of the ongoing pandemic.

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

4. FHFA Releases Proposed Rule on GSE ‘Living Wills’

On December 22, FHFA issued a proposed rule to require Fannie Mae and Freddie Mac (the GSEs) to develop resolution plans, or “living wills.” These living wills, similar to those required by the largest banks, would be designed to facilitate a rapid and orderly resolution if the GSEs must be placed into receivership. Through this process, the GSEs would need to demonstrate how core business lines would be maintained under such a scenario.

  • Why it matters: This proposed rule follows other changes proposed to the GSE capital and liquidity requirements by FHFA, which in the aggregate are meant to prepare the GSEs for post-conservatorship operations. FHFA has placed a strong emphasis on addressing safety and soundness concerns with the GSEs, and living wills are seen as a tool to preserve the viability of core operations and minimize systemic risk resulting from the failure of one or both GSEs.
  • What’s next: Comments on the proposed rule will be due within 60 days of the rule’s publication in the Federal Register.

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

5. FHFA Releases Request for Input on Appraisal-Related Policies

Last week, FHFA issued a Request for Input (RFI) regarding appraisal-related policies, practices, and processes and their impact on the operations of Fannie Mae and Freddie Mac. FHFA is requesting feedback from industry stakeholders in four key areas: appraisal modernization, the Uniform Appraisal Dataset (UAD) and the design of appraisal forms, Automated Valuation Models (AVMs) and appraisal waivers, and valuation differences by borrower and neighborhood ethnic makeup.

  • Why it matters: Updates to the collection and distribution of property valuation data hold the potential to improve the accuracy of appraisal reports, reduce cost and turnaround times, and create greater transparency.  
  • What’s next: MBA will solicit feedback from its membership in order to provide formal comment on or before the RFI’s deadline of Friday, February 26, 2021.

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

6. FHFA Publishes 2021 GSE Duty to Serve Plans

On Tuesday, FHFA released the final 2021 Underserved Markets Plans for Fannie Mae and Freddie Mac (the GSEs) under the Duty to Serve program. While these plans typically cover three-year periods, FHFA is extending the 2018-2020 cycle through 2021 given the economic and financial uncertainty attributable to the COVID-19 pandemic.

  • Why it matters: The Duty to Serve program holds the GSEs accountable for serving three important markets – manufactured housing, affordable housing preservation, and rural housing.
  • What’s next: The GSEs will seek to achieve the objectives found in the 2021 extensions of their Underserved Markets Plans while preparing their longer-term efforts to serve these markets for the 2022-2024 cycle.

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

7. MBA Comments on Proposed Rule on Supervisory Guidance

On Monday, MBA submitted comments in support of a proposed rule on supervisory guidance issued by a group of federal financial regulators, including the CFPB, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Board of Governors of the Federal Reserve System. The proposed rule would create regulations establishing that guidance does not “have the force and effect of law” and therefore cannot serve as the basis for an enforcement action or the issuance of “matters requiring attention, matters requiring immediate attention, matters requiring board attention, documents of resolution, and supervisory recommendations for the public.”

  • Why it matters: Consistent with a longstanding MBA advocacy goal, the proposed rule would prevent federal regulators from using guidance to create legal obligations for regulated entities.   
  • What’s next: MBA will continue to advocate for guidance to be used to provide compliance certainty, rather than as a tool to create legally binding obligations outside of the rulemaking process.

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

8. FHA Finalizes Updated Loan-Level Certifications

On December 22, the Federal Housing Administration (FHA) released Mortgagee Letter 2020-49, announcing the finalized revisions to the loan-level certifications included in the HUD Addendum to the Uniform Residential Loan Application (URLA). The new certifications more closely align with the information required by regulation and law, and represent a substantial improvement over the prior certifications.

  • Why it matters: The finalization of the revised FHA loan-level certifications is the culmination of a years-long advocacy effort by MBA to reduce lender uncertainty and mitigate legal risk associated with the origination of FHA mortgages. These updates mitigate the risk of draconian penalties under the False Claims Act for minor underwriting defects, and directly address an important barrier to increased lender participation in the FHA program.
  • What’s next: Lenders may begin using the revised form immediately and must use the revised form for case numbers assigned on or after Monday, March 22, 2021.

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

9. HUD Extends FHA COVID-19-Related Guidance

In late December, HUD released a series of Mortgagee Letters extending FHA policies and guidance related to the COVID-19 pandemic. The foreclosure and eviction moratorium and the deadline for initial filing of forbearance were both extended to February 28, 2021. The ability for lenders to submit loans in forbearance for FHA endorsement – a critically important policy for situations in which borrowers request forbearance shortly after closing – was extended to March 31, 2021. Additionally, requirements related to verifying self-employment income and rental income, as well as 203(k) escrow guidance, and flexibilities related to reverification of employment and appraisals, all were extended to February 28, 2021.

  • Why it matters: Many of these temporary policies and flexibilities allow for smooth market functioning during the pandemic, facilitating reduced face-to-face contact in the home-buying process and relieving difficulties associated with social distancing or work-from-home policies.
  • What’s next: MBA will continue to advocate for many of these flexibilities to be extended for the duration of the pandemic.

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

10. FASB Issues Accounting Standards Update on LIBOR Transition

On Thursday, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) clarifying the scope of the FASB’s March 2020 LIBOR transition guidanceThe guidance was aimed at easing some of the potential accounting burdens of the upcoming LIBOR transition, and provided temporary, optional expedients and exceptions for applying accounting guidance to contract modifications and hedging relationships that reference LIBOR (or any other reference rate that is expected to be discontinued). Since its issuance, FASB has received questions about whether the guidance can be applied to derivative instruments that do not reference a rate that is expected to be discontinued but that use an interest rate that is modified as a result of reference rate reform for margining, discounting, or contract price alignment. The concern is that such a modification (typically referred to as the “discounting transition”) may have accounting implications that could require reassessment of previous accounting determinations related to those derivatives or have possible hedge accounting consequences.

  • Why it matters: The ASU clarifies that certain optional expedients and exceptions in the March guidance for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The ASU also amends the expedients and exceptions in the guidance to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition.
  • What’s next: MBA appreciates FASB’s commitment to working with stakeholders and providing guidance intended to help address accounting burdens, reduce transition-related costs, and simplify operational challenges relating to LIBOR transition.

For more information, please contact Fran Mordi at (202) 557-2860 or Dan Fichtler at (202) 557-2780.

11. New York Quickly Enacts Foreclosure and Eviction Extensions 

Facing a December 31, 2020, expiration of existing eviction and foreclosure moratoria, New York Governor Andrew Cuomo signed new legislation into law on December 28, 2020. Under the new legislation, homeowners and small landlords who own 10 or fewer residential dwellings can file hardship declarations with their mortgage lender, other foreclosing party, or a court to prevent a foreclosure. Additionally, local governments may not engage in a tax lien sale or a tax foreclosure until at least May 1, 2021 (payments due to the locality are still due). Lending institutions are also prohibited from discriminating against a property owner seeking credit if the property owner has been granted a stay of mortgage foreclosure proceedings, tax foreclosure proceedings, or tax lien sales. They are also prohibited from discriminating because the owner is in arrears and has filed a hardship declaration with the lender.

  • Why it matters: The legislation impairs the ability of property owners to manage their properties. On the single-family side, the law’s requirements, also create potential conflicts with CFPB’s ability-to-repay requirements and FHA and GSE policies prohibiting purchase or insuring of new loans where borrowers are in active forbearance on existing ones.
  • What’s next: MBA will continue to evaluate the law and monitor its impacts.

For more information, please contact William Kooper at (202) 557-2737 or Grant Carlson at (202) 557-2765.

12. Social Security Administration Revises Forms SSA-89 and SSA-89 SP 

The Social Security Administration (SSA) recently released updates to Form SSA-89 (Authorization for the Social Security Administration [SSA] To Release Social Security Number [SSN] Verification) and Form SSA-89 SP (Spanish). Changes include revisions to the Reason for Authorizing Consent sections of the forms. The revised forms are available for immediate use. The new forms must be used by September 30, 2021.

  • Why it matters: Starting later this year, the old versions of the forms will not be accepted by the SSA. 
  • What’s next: Lenders should begin talking with their technology leaders and product providers to plan for the transition to the new forms.

For more information, please contact Rick Hill at (202) 557-2718.

13. [VIDEO]: mPower Moments: Falen Taylor on Self-Confidence and Putting Yourself Out There

In this latest episode of mPower Moments, mPower Founder Marcia M. Davies sits down with MBA Public Affairs Specialist Falen Taylor. Taylor is featured in several MBA Now, Washington Report, and MBA Live videos. She also plays a pivotal role in promoting MBA’s diversity and inclusion efforts to MBA members and the media.

  • Why it matters: In this inspiring episode, Taylor discusses her path to MBA, and how her inner drive and self-confidence are helping her stand out and succeed. Taylor also discusses MBA’s exciting new series launching next week, VOICES: Courageous Conversations with Women of Color. VOICES will explore the experiences of being a woman of color in the industry.
  • What’s next: To watch more mPower Moments, click here.

For more information on VOICES, please contact Marcia Davies at (202) 557-2707.

14. 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
  • The State of the Mortgage Industry: Building a Sustainable Operating Model for 2021 and Beyond – January 28

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.