MBA Advocacy Update July 26 2021

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

Last week, an MBA-led real estate finance coalition letter was sent to the U.S. Senate reiterating our opposition to using g-fees as a payfor in the bipartisan infrastructure negotiations. On Tuesday, HUD Secretary Marcia Fudge testified before the House Financial Services Committee on equitable housing infrastructure and the impact of COVID-19.

On Thursday, six federal agencies once again delayed the conclusion of their ongoing review of the credit risk retention requirements for residential mortgage-backed securities. And on Friday, the Biden administration announced an expansion of COVID-19 mortgage loan modification options for FHA, VA and USDA borrowers who are unable to resume their mortgage payments after exiting forbearance.

We also encourage you to participate in a new DEI survey, run by McLagan. See below for more information.

1. MBA Builds on Engagement with New FHFA Leadership

The first month of Sandra Thompson’s tenure as Acting Director of the Federal Housing Finance Agency has produced several positive policy shifts with respect to Fannie Mae and Freddie Mac, as well as ongoing engagement with the industry as further potential changes are considered. Elimination of the 50-basis-point adverse market refinance fee and expanded eligibility of borrowers for Flex Modifications, in particular, are a result of recommendations MBA made to Thompson upon her appointment.

• Why it matters: More broadly, these policy shifts are indicative of FHFA leadership that will rebalance efforts to improve affordability and address the racial homeownership gap, while maintaining the safety and soundness of the GSEs.
• What’s next: MBA anticipates the new FHFA leadership to evaluate several existing policies with respect to the GSEs, including various product limits set forth in the Senior Preferred Stock Purchase Agreements. These limits include those related to second homes and investment properties, loans with multiple risk factors, and the use of the GSEs’ cash windows.

For more information, please contact Dan Fichtler at (202) 557-2780 or Sasha Hewlett at (202) 557-2805.

2. Biden Administration Announces Expansion of COVID-19 Mortgage Relief Policies 

On Friday, the Biden administration announced new loan modification options for homeowners with government-backed mortgages who are still facing hardships from the pandemic and are unable to resume their mortgage payments after exiting forbearance. Eligible borrowers with loans backed by the Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture can now be offered expanded loss mitigation options that lower their monthly payment. The new policy is an attempt to align with the post-forbearance relief policies for borrowers with mortgages backed by Fannie Mae and Freddie Mac, but differences remain that will force servicers to make operational changes that could adversely impact the borrower experience, just as the largest cohorts are exiting forbearance.

• Why it matters: MBA appreciates the Biden administration and HUD for its ongoing commitment to helping homeowners during the COVID-19 pandemic. However, there is industry concern that repeated changes to the loss mitigation “waterfall” at such a critical juncture could impact servicer performance and harm borrower outcomes. It may also increase compliance and litigation risk, and combined with other recent actions, would have the cumulative effect of undermining the value of mortgage servicing rights for Ginnie Mae loans.   
• What’s next: MBA will continue to work with the Biden administration, HUD, FHFA and other stakeholders on ways to help borrowers facing hardships, while also voicing our concerns on any loss mitigation policy that affects servicer execution, harms borrowers, and in the long-term, adversely impacts the price and access to mortgage credit.  

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

3. MBA, NY MBA Request Veto of NY CRA Bill; MBA Launches New Resource Center

On Friday, MBA and the New York MBA sent a letter to Gov. Andrew Cuomo (D) requesting a veto of recently passed legislation (A.06247-A/S.5246-A) that would impose a new Community Reinvestment Act mandate on nonbanks licensed by the New York Department of Financial Services. The sponsors of the legislation based their approach on a flawed DFS evaluation of mortgage lending to low- and moderate-income and minority borrowers in the city of Buffalo. The veto request to Governor Cuomo emphasizes that the bill represents a solution in search of a problem, and provides detailed data on the robust role IMBs play in serving LMI borrowers and communities in New York.

• Why it matters: The legislation does not recognize the incompatibility of the CRA with the nonbank business model and their historical lending activities. Nonbanks do not have deposits to reinvest, do not have access to direct government support, and already engage in sustainable lending in LMI communities. Imposing CRA requirements on nonbanks is an expensive mandate with limited results. MBA urges state policy makers to address community development concerns with policy initiatives that address specific barriers to homeownership for minority and LMI households, including sustainable downpayment assistance programs, improving affordable housing supply and expanding access to financial education and counseling.
• What’s next: MBA will continue to work with its state partners to oppose CRA legislation for nonbanks in all states, and has launched a new resource center (mba.org/StateCRA) with issue papers and state data sheets to help better inform the debate about how best to increase lending to LMI borrowers.

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

4. MBA Leads Industry Coalition Letter to Senate On G-Fees

On Thursday, MBA and other housing trades and consumer advocates sent a letter to the U.S. Senate urging negotiators working on the Bipartisan Infrastructure Framework to not use GSE guaranty fees (“g-fees”) as a source of funding offsets. As the Senate considers the BIF package, the letter emphasized to lawmakers that homeownership must not be used as the nation’s “piggybank” to cover the cost of unrelated federal programs. A copy of the letter can be found here.

• Why it matters: G-fees should only be used as originally intended: as a critical risk management tool used to protect against periodic losses that occur in the normal course of GSE operations.
• What’s next: MBA and the housing industry will also use the letter in the upcoming budget reconciliation debate and encourage members of Congress not to use g-fees to offset any non-housing-related funding under consideration.

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

5. HUD Secretary Fudge Appears Before House Financial Services Committee    

On Tuesday, HUD Secretary Marcia Fudge appeared before the House Financial Services Committee in a hearing, “Building Back A Better, More Equitable Housing Infrastructure for America: Oversight of the Department of Housing and Urban Development (HUD).” Democrats praised Fudge for her job thus far as HUD Secretary, especially her focus on the ongoing affordable housing crisis. Republicans raised a number of concerns, including the administration’s implementation of President Biden’s American Rescue Plan provisions and programs. Rep. Roger Williams (R-TX) asked the Secretary about decreased lending participation in the FHA program due to the high cost of servicing and enforcement actions taken under the False Claims Act (FCA). A clip of this exchange can be found here.   

• Why it matters: Congressional questions can put pressure on an agency such as HUD to resolve issues garnering significant attention, including the implementation of specific programs and heavy-handedness of enforcement actions.   
• What’s next: MBA will continue to work with both HUD and Congress to ensure additional oversight of FCA enforcement actions and a focus on steps to enable a broader utilization of FHA by depositories.    

For more information, please contact Borden Hoskins at (202) 557-2712 or Alden Knowlton at (202) 557-2741.

6. Federal Regulators Further Delay QRM Review

On Thursday, six federal agencies once again delayed conclusion of their ongoing review of the credit risk retention requirements for residential mortgage-backed securities. This review is being undertaken to consider whether any changes are necessary to the Qualified Residential Mortgage standard, which currently is aligned with the Qualified Mortgage definition. MBA recently led a coalition of trade associations urging the agencies to maintain alignment between QRM and QM, as any narrowing of the QRM standard could lead to a reduction in borrower access to credit. The agencies’ review, which had been scheduled to conclude in June 2021, is now is extended until December 20.

• Why it matters: Sponsors of RMBS comprised of QRM loans are exempt from the requirement to retain at least 5 percent of the credit risk associated with these securities. Alignment between the QRM and QM frameworks facilitates liquidity in the housing market and ensures access to conventional mortgage credit for borrowers across the country, including low- and moderate-income borrowers, underserved households, and first-time homebuyers.
• What’s next: MBA and its coalition partners will continue to advocate for alignment between the QRM and QM frameworks as the agencies’ review progresses.

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

7. Banking Agencies Announce Upcoming Community Reinvestment Act Proposal

On Tuesday, the Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corp. and Federal Reserve Board each announced that they are committed to working together to develop proposed rules on Community Reinvestment Act modernization, which will build very heavily on the September 2020 Advance Notice of Proposed Rulemaking issued by the Fed. In addition, the OCC proposed to rescind its June 2020 CRA final rule. 

• Why it matters: This announcement is welcome news for the industry, which supports an aligned CRA framework across the three federal banking agencies. 
• What’s next: MBA looks forward to working with the banking agencies on proposed rules that build on the FRB’s September 2020 ANPRM, and preserve the important role of mortgage banking activities in serving the needs of low-and moderate-income communities.   

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

8. HUD Releases Updates to FHA Single Family Housing Policy Handbook 4000.1

On Tuesday, HUD released an update to the FHA Single-Family Housing Policy Handbook, providing additional industry guidance to originators and servicers.

For originators, updates largely consisted of policy clarifications and incorporation of guidance previously outlined in Mortgagee Letters. The Handbook update included the recent changes to student loan debt payment calculations, and created a carve-out for student loans in automatic forbearance due to COVID-19, allowing those borrowers to be underwritten using their documented payment before the pandemic. Among the updates for servicers, FHA included the recently announced COVID-19 Advance Loan Modification, and the revised March 22, 2022, implementation date for Section III and Appendixes 4.0 and 5.0 of the Handbook. Additionally, FHA amended guidelines for the Voluntary Termination of Mortgage Insurance as well as changes to the timeline for submission of property preservation expenses.

• Why it matters: MBA appreciates FHA’s efforts to clarify and streamline language in the Handbook. Additionally, incorporating guidance from Mortgagee Letters directly into the Handbook on a regular basis is essential for maintaining a central point of policy authority.
• What’s next: Unless otherwise noted, changes to the Handbook may be implemented immediately, but must be implemented by September 20. MBA will continue to engage with HUD on additional changes to the FHA Handbook through the Government Loan Servicing Subcommittee and FHA Subcommittee.

For more information, please contact Hanna Pitz at (202) 557-2796 or Darnell Peterson (202) 557-2922.

9. NMLS Down Due to Planned Maintenance

On July 21 at 8:00 p.m. ET, the Nationwide Multistate Licensing System (NMLS) and NMLS Consumer Access became unavailable due to planned system maintenance designed to move NMLS to a Cloud platform. NMLS is projected to return to operations on Monday, July 26 at 7:00 a.m. ET. This outage will impact any activities that have prescribed or mandated timelines. MBA has been in contact with the Conference of State Bank Supervisors (CSBS) to inform them that the outage may affect mortgage loan originators (MLOs) and their sponsoring companies’ ability to meet time sensitive deadlines for system license items and application requirements, particularly in regard to MLO temporary authority.

• Why it matters: The system will be completely inaccessible to regulators, companies, and individuals during this time. Individuals and companies will be unable to log into their record to make any filings or amendments to the record, or to review any status updates or licensing deficiencies. Licensing examiners will not have access to the system to process applications or sponsorships.
• What’s next: MBA encourages individual and company users of NMLS to review pending filings to ensure that their information was not lost during the data transfer. Recently, the law firm Mayer Brown posted suggestions for system users to ensure that individuals and companies are ready for the upcoming NMLS maintenance period.

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

10. 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’ efforts to develop 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 mortgage industry, from the perspective of lending and servicing to borrowers, as well as staffing our own organizations. Participating 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 2021.

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, CMB, at (202) 557-2817 or Jamie Woodwell at (202) 557-2936.

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

For more information, please 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:

• Preparing for the End of the Pandemic – What Should Servicers Do Now? – July 28
• Social Media and Digital Advertising 2021 Update – July 29
• 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.