MBA Advocacy Update Nov. 1 2021

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

MBA submitted recommendations to FHFA in response to its RFI on the new Equitable Housing Finance Plans required of the GSEs, as well as on FHFA’s proposed housing goals for the GSEs. MBA also submitted a comment letter and signed onto a joint comment letter to the OCC in response to the Agency’s proposal to rescind its June 2020 CRA Rule.

Conversations continue between President Biden and congressional leaders to finalize process and policy agreements to allow consideration of the Senate-passed, bipartisan infrastructure framework and a re-fashioned Build Back Better tax and spending package. 

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. Senate Judiciary Passes False Claims Act Amendment, Includes Positive Changes Reflected by MBA Advocacy

On Thursday, the Senate Judiciary Committee marked up and passed S. 2428, the False Claims Amendment Act, by a vote of 15–7. The bill, introduced this summer by Senators Chuck Grassley (R-IA) and Patrick Leahy (D-VT), would have made significant changes to the FCA that could have created unintended disruptions in the FHA/VA/RHS market and complicate efforts to work with the private sector to distribute COVID-19-related rental and homeowner assistance. As a direct result of consistent MBA advocacy, S. 2428 passed out of committee with substantial changes to the introduced bill that protected lenders from being exposed to lengthy litigation and monetary penalties for immaterial errors in underwriting, processing, and servicing government loans. MBA’s letter supporting the changes incorporated into the underlying text can be found here.

• Why it matters: In early August, as the Senate debated moving the bipartisan infrastructure package, Senators attempted to attach S. 2428 – without changes – to the infrastructure bill. Although the broad FCA changes within S. 2428 were not aimed directly at the mortgage lending industry, MBA responded in opposition to the proposal swiftly and throughout the summer. Around-the-clock efforts included leading a coalition letter with the American Bankers Association and Housing Policy Council that was sent to Senate leadership, continuous conversations with Senators and their staff, and deploying a robust MAA call to action.
• What’s next: Given the opposition to S. 2428 in Senate Judiciary, further floor action on the bill remains unclear. Senators Grassley and Leahy, the two most senior members of the Senate, can be expected to try and attach their amended bill to other moving legislative vehicles throughout the rest of the current congressional session. While MBA supports the changes to the bill, we will continue to oppose any attempts at legislative or regulatory change pertaining to the FCA that reduces access to credit and leads to higher costs of FHA financing for first-time, low- to moderate-income, and minority homebuyers.

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

2. MBA Provides Recommendations for New GSE Equitable Housing Finance Plans

This week, MBA submitted recommendations to the Federal Housing Finance Agency in response to its request for input on the new Equitable Housing Finance Plans required of Fannie Mae and Freddie Mac. The recommendations closely mirror many of the recommendations outlined in MBA’s policy initiative, Building Generational Wealth through Homeownership, which was announced in September. The letter also emphasizes the importance of a transparent oversight and evaluation process for the plans, and notes that FHFA should take steps such as a rulemaking to ensure these efforts remain durable regardless of how long the GSEs remain in conservatorship.

• Why it matters: The creation and implementation of these plans is an important step in addressing our nation’s long-standing challenges related to housing equity – particularly with respect to the racial homeownership gap.
• What’s next: MBA will continue to engage with the new FHFA leadership on this and other critically important housing finance issues.

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

3. MBA Comments on Proposed GSE 2022-2024 Affordable Housing Goals

On Monday, MBA submitted comments to FHFA in response to its proposed rule establishing the 2022-2024 affordable housing goals for the GSEs. MBA supported the proposed benchmark levels of purchase goals for both the low- and very low-income borrower categories because they are set within the confidence interval of the market projections developed by FHFA. MBA also endorsed the newly reworked structure of the subgoal focused on minority census tracts. However, with respect to the multifamily market, MBA highlighted concerns with several elements of the goals within the proposed rule.

• Why it matters: MBA strongly supports efforts to ensure sustainable and affordable housing for low-income and very low-income households – both through homeownership and rental housing.
• What’s next: FHFA will review the public comments and issue a final rule in the coming weeks.

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

4. CFPB Director Testifies before Congress

On Wednesday and Thursday, Consumer Financial Protection Bureau Director Rohit Chopra testified before the House Financial Services Committee and the Senate Banking and Housing Committee in his first public appearances since being sworn in earlier this month. In both chambers, lawmakers largely agreed on the need to ensure protection of consumer data and shed light on illicit debt collection practices. Republicans reasserted their opposition to an agency approach centered around “regulation through enforcement,” while Democrats raised issues surrounding consumer borrowing.

• Why it matters: Multiple issues were addressed during the hearings, including small business lending, credit reporting regulation, mortgage servicing and foreclosures, and fintech regulation. Lawmakers on both sides of the aisle pressed Director Chopra on the General Qualified Mortgage final rule. He indicated a need to more fully understand the rule, and expressed an interest in understanding what factors might be impeding the refinance market. Congressional questions can put pressure on an agency like CFPB to resolve issues garnering significant attention, including the implementation of specific programs and the heavy-handedness of enforcement actions.
• What’s next: MBA will continue to work with both CFPB and Congress on many issues and with respect to QM, will aim to ensure the General QM Final Rule’s price-based standards are retained by the Bureau.

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

5. DOJ, CFPB, and OCC Announce Broad Initiative to Combat Redlining 

On October 22, U.S. Attorney General Merrick Garland held a press conference to announce a new initiative to address redlining and lending discrimination. As part of the Combating Redlining Initiative, the Department of Justice will partner with the Office of the Comptroller of the Currency and the CFPB to conduct the DOJ’s “most aggressive and coordinated effort to address redlining.” Along with describing the new initiative, the agencies announced a $5 million settlement in a redlining action against Trustmark, a national bank, for allegedly discriminatory lending practices in the Memphis area (details available in the complaint, here). Attorney General Garland noted that the Trustmark matter was one of several redlining investigations currently ongoing, with more expected in the near term. As part of his remarks during the press conference, new CFPB Director Rohit Chopra indicated that, along with traditional theories of redlining liability, the Bureau intends to watch closely for “digital redlining[.]”

• Why it matters: The announcement is just the most recent confirmation of a trend discussed in numerous MBA webinars and conference panels over the past 12 months, namely that mortgage lenders and servicers should expect a heightened focus by regulators on fair lending enforcement using a “redlining” framework. This development, which predates the change in administration (see e.g., enforcement actions by the OCC against Cadence Bank and CFPB against Townstone Financial), will be a major and coordinated focus of the CFPB, the banking agencies, and the DOJ.
• What’s next: MBA will continue to develop compliance education for members on the evolving fair lending landscape, as well as helping members identify business strategies to tap into underserved markets and borrower segments.   

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

6. FHFA Proposes to Institute New Disclosure Requirements for the GSEs

On Wednesday, FHFA issued a Notice of Proposed Rulemaking that would introduce additional public disclosure requirements associated with the regulatory capital framework in place for the GSEs. The proposed rule would require regular quantitative and qualitative reporting by the GSEs on a variety of metrics including their capital structure, capital adequacy, capital buffers, credit risk exposures (and transfers), and exposures to various asset classes. The proposed changes are intended to align with many of the public disclosure requirements for banks under the Basel framework, though with notable differences based on the unique business models of the GSEs.

• Why it matters: The proposed changes have the potential to benefit the mortgage market, as they could strengthen market discipline and encourage prudent risk management at the GSEs.
• What’s next: FHFA will be accepting public input on the NPR for 60 days following its publication in the Federal Register. MBA plans to further analyze the NPR over the coming weeks and submit comments. MBA will also respond to FHFA’s proposed changes to the GSE regulatory capital framework. 

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

7. MBA Submits Comments on OCC’s CRA Rule Rescission

On Friday, MBA submitted a comment letter and joined a joint comment letter in response to the OCC’s proposal to rescind its June 2020 Community Reinvestment Act Rule. 

• Why it matters: MBA recommended that any unified CRA modernization rule should include an inexhaustive list of topics that are important to members, noting that some aspects of the Agency’s now-rescinded June 2020 CRA rule should be retained in the forthcoming joint agency proposal. In the joint trades letter, the associations recommended that the OCC permit certain parts of the June 2020 CRA Rule that have already been implemented by many institutions to be retained, rather than revert completely to the 1995 CRA Rule.
• What’s next: MBA looks forward to continuing the constructive engagement with the OCC and the other banking agencies as they work towards developing a modified CRA regulatory framework that banks can comply with, regulators are able to consistently implement, and one that benefits communities and low-and-moderate income borrowers.

For more information, or to join MBA’s CRA working group, please contact Fran Mordi at 202 557-2860.

8. MBA Submits Comments on Proposed FHA 40-Year Loan Modification

On Wednesday, MBA submitted comments to the Federal Housing Administration on its proposal to expand its COVID-19 Loss Mitigation programs to include a 40-year loan modification. MBA recommended that FHA delay the introduction of the proposed 40-year loan modification until after the first quarter of 2022, in addition to highlighting that the lack of a Ginnie Mae securitization framework for 40-year loans makes it difficult for the industry to provide more detailed recommendations on the impact of the proposal. Moreover, MBA urged FHA to remove the proposal’s requirement that the 40-year loan modification be offered in conjunction with a partial claim out of concern that it will limit access to the program for many borrowers most in need. This week FHA extended the deadline for comments to November 11, 2021. 

• Why it matters: FHA’s adoption of a 40-year loan modification would further align it with GSEs, which already offer the option.
• What’s next: MBA will continue to monitor for Ginnie Mae’s expected release of a new pool type to support the securitization of the 40-year loan modification.

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

9. FHA Publishes Proposed Changes to Servicing Defect Taxonomy 

On Thursday, FHA posted its proposed changes to its Single-Family Housing Policy Handbook concerning Servicing Defect Taxonomy, which FHA uses to assess risk and quality assurance at the loan level. The suggested changes would add six new areas of defect that would impact a loan’s servicing life span.

• Why it matters: The goal of the changes is to provide additional clarity as to how FHA proposes to identify and evaluate the severity of servicing errors and hold servicers responsible for servicing compliance. A well-designed servicing defect taxonomy is an important component of MBA’s overall effort to strengthen operational and legal certainty in the FHA program and reduce False Claims Act risk. 
• What’s next: The MBA Loan Administration Committee will hold a call on Thursday, November 4, from 3:30 to 4:30 p.m. ET, to gather member feedback for comments to be submitted by December 27. Please reach out to Darnell Peterson for call details or to be added to the committee.

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

10. Eleventh Circuit Issues Substitute Opinion in Hunstein

On Thursday, the Eleventh Circuit vacated its previous ruling and issued a substitute opinion in Hunstein v. Preferred Collection and Management Services, Inc. While the court’s core findings have not changed, the court’s decision to issue a substitute opinion has certain procedural implications, including creating new deadlines for MBA and other parties’ efforts to seek rehearing and rehearing en banc.

• Why it matters: In Hunstein, the Eleventh Circuit adopted an expansive reading for the Fair Debt Collection Practices Act, finding a debt collector violates the FDCPA when transmitting a consumer’s personal information to a mail vendor.
• What’s next: MBA will continue working with outside counsel, members, and partner trade associations to secure en banc review of the Hunstein decision, with the ultimate goal of reversing the court’s ruling.

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

11. Federal and State Policymakers Take Action on CRA for Nonbanks

On October 15, the House Financial Services Subcommittee on Housing, Community Development, and Insurance held a hearing entitled, Zoned Out: Examining the Impact of Exclusionary Zoning on People, Resources, and Opportunity. The hearing examined several bills, including H.R. 2768, the American Housing and Economic Mobility Act of 2021, as introduced by Rep. Emanuel Cleaver (D-MO) and Sen. Elizabeth Warren (D-MA). MBA opposes language in the legislation, which would apply CRA mandates to nonbanks. Also last week, a bill approved by the New York Legislature to expand the state’s CRA law to nonbanks – it was passed in June without a hearing – was submitted to the Gov. Kathy Hochul (D) for consideration. MBA and the New York MBA sent then-Governor Andrew Cuomo a letter requesting a veto and more recently resent the letter to Hochul. Lastly, the Illinois Departmental of Financial and Professional Regulation confirmed this week that the due date for comments on their Advance Notice of Proposed Rulemaking for the state’s CRA law enacted in March has been extended to December 29, .

• Why it matters: MBA believes the CRA framework does not fit the IMB business model. Independent mortgage banks (IMBs) do not take insured deposits to reinvest, do not have access to direct government support, and already engage in sustainable lending to low- and moderate-income borrowers.
• What’s next: While MBA staff in Washington, D.C. continue to vigorously represent MBA IMB members on this issue, at the state level, IMBs 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 William Kooper (202) 557-2737 or Alden Knowlton (202) 557-2816.

12. MBA Calls on Member Companies to Sign the 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 week at MBA’s Annual Convention & Expo. 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 (ex., CEO) should complete this online form. More information on how to take action will follow. Only one senior member per organization needs to sign the pledge.

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

13. 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:

• CFPB’s New AVM Guidelines – How to Be Prepared – November 3
• Are We There Yet? CRE and LIBOR Transition Check-Up – November 4
• Understanding the Surge in Single-Family Rentals – November 4
• The Impact of Increased Enforcement on Marketing Compliance – November 18
• 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.