Home > MBA Newslinks > MBA NewsLink Monday Oct. 25 2021

MBA Advocacy Update Oct. 25 2021

October 25, 2021

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

On Monday, in remarks given at MBA’s Annual Convention and Expo 2021, FHFA Acting Director Sandra Thompson announced two steps to advance housing sustainability and affordability. Also on Monday, Senate Appropriations Committee Chairman Patrick Leahy (D-VT) released the text of the fiscal year (FY) 2022 T-HUD Senate Appropriations bill.

On Thursday, the Financial Stability Oversight Council released a detailed report on climate change related risks to the global financial system. And congressional leaders continued negotiations with the White House in an attempt to reach an agreement on a new “framework” for a tax and reconciliation package before Halloween.

1. Acting FHFA Director Thompson Announces Appraisal and Refi Policy Enhancements at MBA Annual Convention

On Monday, in remarks given at MBA’s Annual Convention and Expo 2021, Federal Housing Finance Agency Acting Director Sandra Thompson announced two steps to advance housing sustainability and affordability. First, Fannie Mae and Freddie Mac will incorporate desktop appraisals into their Selling Guides for many new purchase loans, beginning in early 2022. Second, the GSEs will expand certain eligibility requirements for their RefiNow and Refi Possible offerings, particularly through increases to the income threshold from 80 percent of area median income to 100 percent. Thompson also noted that FHFA will delay updates to its capital and liquidity requirements for non-depository servicers until 2022 at the earliest to allow servicers to focus on assisting consumers as they exit forbearance. She went on to commit that FHFA would not adopt policies that disrupt lender pipelines due to insufficient implementation periods – a major plank of MBA advocacy.

  • Why it matters: MBA has advocated for both the continued utilization of certain pandemic-related flexibilities, such as desktop appraisals, as well as enhancement of the GSEs’ new refinance programs for low-income borrowers. 
  • What’s next: MBA will continue to engage with FHFA leadership on these and other critically important housing issues.

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

2. Senate Fiscal Year 2022 “T-HUD” Appropriations Act Released

On Monday, Senate Appropriations Committee Chairman Patrick Leahy (D-VT) released the text of the fiscal year 2022 Transportation, Housing and Urban Development, and Related Agencies (“T-HUD”) Senate Appropriations bill. Under the legislation, HUD would receive $65.4 billion in total budgetary resources, which is $5.7 billion above the FY 2021 enacted level. The legislation provides $300 million to finance the information technology (IT) systems that support HUD programs and operations, including FHA Mortgage Insurance, housing assistance and grant programs, as well as core financial and general operations. This funding level is the same as fiscal year 2021. As requested by MBA, the committee specifically dedicated $20 million of that funding to continue the modernization of FHA’s IT systems.

  • Why it matters: In its accompanying report regarding IT funding for FHA, the committee specified that “[t]hese funds are to be used for improving single-family insured mortgage processing, underwriting and delivery, modernizing the single-family asset management and claims systems, and addressing lender management activities and program compliance.”
  • What’s next: It is unlikely at this late stage in the appropriations process that the Senate will consider individual spending bills, setting the stage for negotiations with the House on an omnibus fiscal year 2022 appropriations to be voted on in December.

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

3. House Financial Services Committee Holds Third Hearing on Housing as Reconciliation Negotiations Continue

On Thursday, the House Financial Services Committee convened for a third hearing that focused on the importance of investing in housing as part of the Build Back Better Act budget reconciliation package and the ongoing interparty negotiations between congressional Democrats and the White House. This hearing followed a similar theme from last week, when the Subcommittee on Housing, Community Development and Insurance held a hearing focused on exclusionary zoning. On Wednesday, Senate Banking and Housing Committee Chairman Sherrod Brown (D-OH) and HFSC Chairwoman Maxine Waters (D-CA) also held a press conference urging congressional leaders to maintain robust housing investments in the BBBA.

  • Why it matters: Throughout the course of the budget reconciliation process, multiple flashpoints on tax policy and spending levels have emerged between progressives — who have pushed for more ambitious proposals on high-income earners and corporations — and moderates who have expressed uneasiness with a sharper hike in tax rates and the overall price tag. As Democratic leadership examines ways to pare back the $3.5 trillion figure for the proposed BBBA, several affordable housing provisions could be curtailed or eliminated as part of the broader package.
  • What’s next: Democratic leaders are publicly aiming for a broad agreement on the reconciliation bill’s framework before the end of the month. MBA will continue its direct lobbying efforts to urge Congress to uphold our industry’s priorities in this evolving bill.

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

4. Regulators Press for Transition away from LIBOR; OCC Highlights Risks of LIBOR Alternatives other than SOFR

On Wednesday, a group of federal and state regulators issued a joint statement emphasizing the need for financial institutions to transition away from the use of LIBOR in new contracts no later than December 31. The statement clarifies the meaning of “new contracts,” reiterates expectations for robust fallback language in contracts, and advises institutions to develop clear communication plans and ensure systems and operational capabilities for the transition. Earlier in the week, the Office of the Comptroller of the Currency released a bulletin updating its self-assessment tool to assist banks in their transition away from the use of LIBOR. While the OCC bulletin notes that banks may use any replacement rate they determine to be appropriate, the agency also specifies several concerns with the use of credit-sensitive rates – concerns that it does not have with the use of the Secured Overnight Financing Rate.

  • Why it matters: Together, these developments point to the continued escalation of regulators’ admonitions with respect to reliance on LIBOR. The OCC bulletin contains a stark warning regarding its concerns that many credit-sensitive rates may not be sufficiently robust, nor provide sufficient underlying transaction volumes. The bulletin further notes that the OCC plans to focus its initial supervisory efforts on banks that choose LIBOR alternatives other than SOFR, and it is likely that other regulators will follow suit.
  • What’s next: Regulators expect financial institutions to cease entering into new contracts indexed to LIBOR as soon as possible and no later than December 31. The Consumer Financial Protection Bureau also noted that it plans to issue a final rule in January 2022 to assist servicers in the transition away from LIBOR.

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

5. FSOC Issues Report on Climate-Related Financial Risk

In response to a May 2021 executive order, the Financial Stability Oversight Council – a group comosed of the heads of the major financial regulators – released its Report on Climate-Related Financial Risk. The FSOC report includes dozens of recommendations spanning risk identification, data and methodological gaps, public disclosures, and scenario analysis.

  • Why it matters: While the report highlights potential risks to residential and commercial mortgage markets, it does not institute any new requirements on market participants. It instead provides a framework for the administration’s ongoing efforts to mitigate systemic risks to the financial system and tailor its financial policies to support a transition to a less carbon-intensive economy.
  • What’s next: The FSOC and its member agencies will continue to analyze climate-related financial risks and engage with stakeholders through the new Climate-related Financial Risk Advisory Committee. For the residential mortgage market, this work eventually could lead to changes in underwriting requirements, insurance pricing or availability, disclosure mandates, or scenario analysis and stress testing. MBA will seek to participate in the stakeholder outreach through the CFRAC.

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

6. South Dakota Division of Banking Extends Remote Work Guidance

Last week, the South Dakata Division of Banking announced that it will be extending its interim guidance that allows mortgage loan originators to work away from a licensed branch location until June 30, 2022. The announcement is responsive to MBA’s recommendations urging state regulators to extend their remote work guidance through 2022 at the Conference of State Bank Supervisor’s Ombudsman meeting in September.

  • Why it matters: The interim guidance is consistent with MBA’s model legislation and regulations and other states that have acted to extend remote work permission.
  • What’s next: MBA will continue to work with state and local association partners to advocate for its model legislation and regulation for permanent remote work flexibility for licensed activity. In addition, MBA is asking members to provide any information on legislative or regulatory efforts in their state that would allow remote work by contributing to a Google spreadsheet that will be used to update the information on MBA’s resource center.

For more information, please contact Kobie Pruitt (202) 557-2870.

7. MBA Annual Forecast: Purchase Originations to Increase 9% to Record $1.73 Trillion in 2022

On Sunday at MBA’s Annual Convention & Expo 2021, MBA’s Mike Fratantoni, Marina Walsh, CMB, and Joel Kan presented their mortgage market outlook heading into next year. Purchase mortgage originations are expected to grow 9% to a new record of $1.73 trillion in 2022. MBA expects refinance originations – which are expected to decline 14% this year to $2.26 trillion — to slow even further next year, decreasing by 62% to $860 billion.

  • Why it matters: Declining origination volume, tighter lending margins and a shift to a purchase-dominated market will challenge lenders in 2022. MBA forecasts mortgage originations to total $2.59 trillion in 2022 – a 33% decline from this year. In 2023, mortgage originations are expected to decrease to $2.53 trillion. Purchase originations are forecasted to reach new successive records in 2022 and 2023, while higher mortgage rates and fewer eligible homeowners will lead to further declines in refinance volume.  
  • Said Fratantoni, “The economy and labor market rebounded in 2021, but overall growth fell short of expectations because of stubborn supply chain issues that fueled faster inflation, slowed consumer spending, and presented challenges in filling the record number of job openings available. With inflation elevated and the unemployment rate dropping fast, the Federal Reserve will begin to taper its asset purchases by the end of this year and will raise short-term rates by the end of 2022.”

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

8. 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) 557-2890.

Tags:
Read next article
Back to Full Issue