MBA Advocacy Update Nov. 8, 2021

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

Late last week, Ginnie Mae issued guidance regarding its seasoning requirements following modifications of VA loans. Also last week, Ginnie Mae released details of its new custom pooling option for the securitization of modified loans with terms greater than 30 years. And House leaders continued to lay the groundwork – both substantively and procedurally – to hold a floor vote on the latest iteration of President Biden’s Build Back Better Act tax and reconciliation package. MBA remains engaged and will provide any necessary updates.  

MBA member companies are encouraged to sign the Home for All Pledge and join the nearly 100 organizations that have already committed to promoting minority homeownership; affordable rental housing; and company diversity, equity, and inclusion. A senior member of your organization (ex. CEO, COO, President) should complete this online form. Only one senior executive per organization needs to sign the pledge.

1. Ginnie Mae Details Seasoning Requirements for Refinances of Modified VA Loans

Late last week, Ginnie Mae issued guidance to address widespread confusion regarding its seasoning requirements for refinancing loans following modifications of Department of Veterans Affairs loans. The key takeaways from this guidance are that Ginnie Mae considers modified loans to be “new loans.” As a result, modified VA loans do not need to undergo seasoning after the modification before they can be re-pooled, but modified VA loans must season for at least 210 days before refinances of those loans are eligible for pooling.

• Why it matters: MBA provided detailed comments to Ginnie Mae in August seeking clarity on these policies. Ginnie Mae’s acknowledgement of confusion regarding its existing policies bodes well for issuers that have received repurchase demands due to this issue in recent months. The Ginnie Mae guidance does not, however, provide further details as to how issuers should track whether loans previously were modified – particularly if they are not the servicer of the modified loan and the modification has not been recorded in a timely manner.
• What’s next: These policies will take effect on January 1, 2022. MBA will continue to engage with Ginnie Mae to ensure sufficient clarity for industry stakeholders prior to the upcoming effective date.

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

2. Ginnie Mae Announces Pooling Parameters for 40-Year Modifications

On October 29, Ginnie Mae released details of its new custom pooling option for the securitization of modified loans with terms greater than 30 years. The new “C ET” pools will be Ginnie Mae II custom pools containing only modified, single-family, fixed-rate loans with terms greater than 30 years and up to 40 years. Issuers also must attest that the modifications of these loans were occasioned by default or a reasonably foreseeable default of the loans.

• Why it matters: The C ET pools are responsive to the development of a 40-year modification option in the Federal Housing Administration COVID-19 loss mitigation waterfall. MBA recently submitted comments to FHA in support of the 40-year modification option, while noting that FHA should not implement an interest rate cap on the 40-year option until the Ginnie Mae pooling parameters were made available and there is greater understanding of the pricing and liquidity associated with these securities.
• What’s next: The new pooling option will be available for issuance in December. Comments on the FHA 40-year modification option are due by November 11.

For more information, please contact Dan Fichtler at (202) 557-2780 or Darnell Peterson at (202) 557-2922.

3. New York Governor Signs CRA Bill for Nonbanks

On Monday, New York Governor Kathy Hochul (D) signed legislation (A.6247-A/S.5246-A) strongly opposed by MBA and the New York MBA, which will expand coverage of the state’s Community Reinvestment Act law to nonbank mortgage lenders. The bill passed in June without a public hearing and despite a Mortgage Action Alliance call to action. MBA and the New York MBA sent then-Governor Andrew Cuomo a letter requesting a veto and, more recently, resent the letter to Hochul. The bill becomes effective in a year, and it directs the Department of Financial Services to promulgate rules ahead of that time.

• Why it matters: MBA believes the CRA framework does not fit the independent mortgage bank (IMB) business model because IMBs do not take federally insured deposits and already are the primary source of mortgage credit for low- to moderate-income borrowers. 
• What’s next: MBA and the New York MBA are already in contact with the NYDFS on the forthcoming rulemaking process and recommend establishing a presumption of compliance for IMBs whose lending to minority and low- to moderate-income (LMI) borrowers exceeds certain benchmarks. MBA IMB members are strongly encouraged to review the detailed materials on the MBA’s CRA resource page, and engage with their state legislative representatives before bills are introduced to explain the incompatibility of the CRA with the business models and historical lending activities of IMBs.

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

4. MBA and MMBBA Comment on Proposed Maryland Bankruptcy Rule Changes

On Monday, MBA and the Maryland Mortgage Bankers and Brokers Association commented on proposed changes to Maryland’s bankruptcy rules by the U.S. Bankruptcy Court for the District of Maryland. The proposed rule would require creditors to communicate electronically with, and accept electronic payments from, customers in bankruptcy without regard to their bankruptcy status.

• Why it matters: Prior to bankruptcy, the loan documents define payment obligations, and that information is reflected in the servicing “platform.” That platform typically generates electronic communications. Once bankruptcy is filed, bankruptcy law and practice largely overrides those obligations. If servicers use their platform to electronically send information to customers as they did before bankruptcy, that information will not be accurate, because it will not reflect the different payment dates and amounts required by the bankruptcy court. Servicers do not have bankruptcy specific platforms, nor have they modified their existing platforms to provide loan-level bankruptcy information to customers in bankruptcy due to this complexity, which is compounded by the need to incorporate ever-changing payment requirements as they develop throughout the bankruptcy case. 
• What’s next: MBA and MMBBA will continue to advocate for a solution that addresses the concerns of lenders and servicers in Maryland.

For more information, please contact Sara Singhas at (202) 557-2826 or Kobie Pruitt at (202) 557-2870.

5. Fed Begins Tapering of Treasury, MBS Purchases

On Wednesday, the Federal Open Market Committee of the Federal Reserve announced its plans to begin tapering its purchases of Treasury securities and agency mortgage-backed securities. The Federal Reserve has been increasing its holdings of Treasury securities and agency MBS by $80 billion and $40 billion, respectively, each month. Beginning this month, it will reduce these purchases by $10 billion per month for Treasury securities and by $5 billion per month for agency MBS. If the Federal Reserve were to continue on this path, it would cease adding to the size of its portfolio by mid-2022.

• Why it matters: This tapering of asset purchases represents the first pullback in accommodative monetary policy by the Federal Reserve since the onset of the COVID-19 pandemic. These actions were anticipated in MBA’s latest forecast, which projects that 30-year mortgage rates will increase to about 4% by the end of 2022.
• What’s next: The FOMC noted that “similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook.” The FOMC also noted that it is keeping the federal funds rate near the zero lower bound, and will continue to do so until the economy reaches maximum employment and inflation reaches (and exceeds) 2% for “some time.” MBA Chief Economist Mike Fratantoni commented that MBA expects “the economy will be at full employment by the middle of next year.”

For more information, please contact Dan Fichtler at (202) 557-2780 or Mike Fratantoni at (202) 557-2935.

6. Sign MBA’s Home for All Pledge to Promote Minority Homeownership, Affordable Rental Housing and DEI

Kristy Fercho, MBA Chair, and Executive Vice President and Head of Home Lending at Wells Fargo, announced the Home for All Pledge last month at MBA’s Annual Convention & Expo 2021. The member company action pledge represents a long-term commitment by MBA member companies and employees to promote minority homeownership; affordable rental housing; and company diversity, equity, and inclusion. Click here to see the growing list of companies that have already signed the pledge.

• Why it matters: Member companies are encouraged to sign the Home for All Pledge today and commit to aligning with MBA’s efforts to: foster public policies and industry practices that promote and sustain minority homeownership and affordable rental housing; support market-based solutions through MBA’s place-based CONVERGENCE programs; and champion diversity, equity and inclusion in our workplaces and our industry.
• What’s next: To sign the Home for All Pledge, a senior member of your organization (e.g., CEO) should complete this online form. More information on how to act will follow. Only one senior member per organization needs to sign the pledge.

For more information, please contact Lisa Haynes at (202) 557-2835.

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:

• Emergency Rental Assistance: What is Working, Where Are the Challenges, and What is to Come? – November 17
• The Impact of Increased Enforcement on Marketing Compliance – November 18
• Introduction to MISMO’s Commercial Appraisal Dataset – November 23
• Rental Housing Perspectives: Low-Income Housing Tax Credit Landscape – November 30
• Commercial Real Estate Tech Tools & Trends – December 1

MBA members can register for any of the above events and view recent webinar recordings. For more information, please contact David Upbin at (202) 557-2931.