MBA Advocacy Update May 10, 2021
On Wednesday, Fannie Mae and Freddie Mac published a lender letter and bulletin, respectively, providing more details on the new refinancing option for low-income borrowers announced last week by FHFA. Also last week, FHFA announced finalization of a proposed rule that would require the GSEs to develop resolution plans, or “living wills.”
1. GSEs Release Details of New Refinance Option for Low-Income Borrowers
On Wednesday, Fannie Mae and Freddie Mac published a lender letter and bulletin, respectively, providing more details on the new refinancing option for low-income borrowers announced last week by the Federal Housing Finance Agency. In addition to the eligibility parameters specified by FHFA, the GSEs’ guidance clarifies several aspects of the new offering, including that eligible refinances must be: delivered to the same GSE that owns or securitized the prior loan, seasoned between 12 and 120 months, and compliant with the applicable Qualified Mortgage (QM) requirements. The GSEs’ guidance also specifies the underwriting and documentation requirements for eligible loans.
- Why it matters: This new option could help a segment of low-income borrowers take advantage of the opportunity to lower their monthly mortgage payments, though the scope of the program is likely to be quite limited due to the narrow eligibility criteria – in particular, the requirement that eligible borrowers cannot have missed a mortgage payment in the past six months and cannot have missed more than one payment in the past 12 months, which likely delays or eliminates from consideration many borrowers who missed payments while in a COVID-19 forbearance plan.
- What’s next: The Fannie Mae offering is available beginning June 5, while the Freddie Mac offering is available beginning August 30. MBA will continue to work with FHFA and the GSEs to ensure appropriate refinance opportunities are available to qualified borrowers, including those who have recently exited, or are preparing to exit, COVID-19 forbearance plans.
2. FHFA Publishes Final Rule on GSE ‘Living Wills’
Last week, FHFA announced finalization of a proposed rule that would require the GSEs to develop resolution plans, or “living wills.” These living wills, similar to those required by the largest banks, would facilitate a rapid and orderly resolution if a GSE must be placed into receivership. The final rule will require the GSEs to demonstrate how core business lines would be maintained under such a scenario. Few changes were made to the proposed version of the rule.
- Why it matters: 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: FHFA also published a fact sheet summarizing the final rule. MBA will continue to work with FHFA on future rulemakings related to the GSEs’ safety and soundness, as well as actions to reduce the disruptive nature of limits on purchases of second homes and investor properties or the use of the cash window.
For more information, please contact Sasha Hewlett at (202) 557-2805.
3. FHFA Issues RFI on Short-Term Rental Units in Condominium, Cooperative, and Planned Unit Development Projects
On Thursday, FHFA issued a Request for Input on the GSEs’ eligibility requirements for mortgages in condo, co-op, and planned unit development (PUD) projects where a large portion of units are offered for short-term rentals (30 days or less) or are used primarily for the purpose of vacation or recreational lodging. FHFA intends to use the feedback to determine whether changes need to be made to the GSEs’ policies to ensure that properties are meeting eligibility requirements.
- Why it matters: Earlier this year, the Preferred Stock Purchase Agreement between the Treasury and GSEs was amended to implement caps on the number of second home and investment properties Fannie Mae and Freddie Mac could maintain in their respective portfolios. Consequently, lenders have been instructed to re-evaluate their production mix to ensure that the GSEs do not exceed the prescribed caps. This RFI comes on the heels of these changes to the PSPA. Although one of the GSEs has already tightened the condo/PUD review process, the RFI offers stakeholders the opportunity to address concerns with those actions and underscore to FHFA the crucial role non-owner-occupied originations play in the health of local housing markets and the broader ecosystem.
- What’s next: All responses to the RFI must be submitted no later than Monday, July 5. MBA will be soliciting feedback from members to shape its response.
For more information, please contact Julienne Joseph at (202) 557-2782.
4. FHA Issues Clarification on Timely Borrower Loss Mitigation Review
On Friday, the Federal Housing Administration released guidance for servicers concerning the review of borrowers exiting COVID-19 forbearance. The guidance clarifies that the servicers may begin evaluating borrowers for loss mitigation options prior to completion or expiration of their COVID-19 forbearance period. This announcement is in response to inquiries received from servicers who are unclear as to when to begin reviewing borrowers for COVID-19 loss mitigation options.
- Why it matters: Early borrower outreach and assessment from servicers is key to resolving delinquencies and avoiding foreclosure.
For more information, please contact Darnell Peterson at (202) 557-2922.
5. Arkansas Governor Signs RON Legislation; RON Bill Moving in New York
Late last week, Arkansas Gov. Asa Hutchinson (R) signed legislation (SB340) that will enable the use of remote online notarization (RON) in the state. SB340 is consistent with the MBA-ALTA model bill and the non-partisan Uniform Law Commission’s Revised Uniform Law on Notarial Acts. On Wednesday, MBA and the New York Mortgage Bankers Association submitted testimony prior to a scheduled New York State Assembly joint hearing of the Governmental Operations, Consumer Affairs and Protection, Banks, and Judiciary committees today to urge members of the legislature to pass RON legislation consistent with the national standards for RON implementation. Christina Wiley, Executive Director of the NYMBA, and Jacqueline Goralczyk, Partner at DeAngelus Goralczyk, appeared before the committees to deliver remarks on behalf of the real estate finance industry.
- Why it matters: Arkansas becomes the 34th state with a RON law that is substantively consistent with the minimum standards necessary for safe and secure real estate finance transactions.
- What’s next: MBA will continue to collaborate with the NYMBA and other state and local stakeholders to get RON legislation passed in the state.
For more information, please contact Kobie Pruitt at (202) 557-2870.
6. Updated RIHA Study: Less Than 10 Percent of Homeowners and Renters Have Missed More Than Two Payments during the COVID-19 Pandemic
On Wednesday, MBA’s Research Institute for Housing America released a first-quarter 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 more than 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 March, an improvement from December 2020 and the lowest number since the onset of the COVID-19 pandemic. Overall, 23.7% of renters and 14.2% of homeowners have missed at least one housing payment during the pandemic, but only 8.6% of renters and 6.8% of homeowners missed more than two payments.
- Edward Seiler, Executive Director of RIHA and MBA Associate Vice President of Housing Economics, says, “RIHA’s study continues to provide an accurate, real-time picture of households’ ability to make their housing and student debt payments during the COVID-19 pandemic. The expected acceleration in hiring and economic growth during the rest of the year should help most affected households resume their housing and student debt payments before expanded unemployment benefits expire at the end of September.”
For more information, please contact Eddie Seiler at (202) 557-2739.
7. 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:
- Basics of Commercial Loan Closing and Loan Documentation – May 11
- Key FDCPA Compliance Issues and Considerations – May 18
- Harnessing and Leveraging Data in Today’s CRE Markets – May 18
- Introduction to Commercial Mortgage-Backed Securities – May 19
- CONVERGENCE: The Future Is Female: How Women Are Shaping the Future of Housing – May 26
- Retail 3.0: Re-envisioning Retail – May 26
- Benchmarking for Performance and the Performance Ratios Every Mortgage Banker Must Know – June 24