MBA Advocacy Update Sept. 20 2021
On Tuesday, following months of MBA advocacy, the Treasury Department and FHFA suspended certain limits on the business activities of the GSEs. On Wednesday, FHFA also announced a Notice of Proposed Rulemaking to amend the Enterprise Regulatory Capital Framework Rule. And several House committees completed their respective portions of a proposed $3.5 trillion Fiscal Year 2022 tax and budget reconciliation package.
1. Treasury and FHFA Suspend Key Limits on GSE Activities, Align with MBA Recommendations
On Tuesday, the Department of the Treasury and the Federal Housing Finance Agency announced they are suspending certain limits on the business activities of Fannie Mae and Freddie Mac. Tuesday’s suspension of certain provisions of the Preferred Stock Purchase Agreements removes artificial limits on GSE acquisitions of loans secured by second homes and investment properties, loans with multiple risk factors and lenders’ use of the cash windows. Multifamily lending volumes caps imposed in the PSPAs were also eliminated. This announcement follows ongoing MBA engagement with Treasury and FHFA on this issue, including an MBA-led coalition letter highlighting concerns with these limits shortly before they were suspended.
- Why it matters: These problematic limits had been a focus of intense MBA advocacy since their adoption in January, and their suspension is directly responsive to recommendations made by MBA. The limits on loans secured by second homes and investment properties have been particularly problematic due to the frictions they have caused in the market. The suspension of these limits should enable the GSEs to better support several important segments of the housing market. Although the disruptive, backward-looking market share caps applied at the GSE and lender levels are gone, FHFA’s announcement indicates the agency will continue to use its long-standing supervisory authorities to manage the GSEs’ risk profile and mission compliance.
- What’s next: While these suspensions are in effect, Treasury and FHFA will consider further revisions to the PSPAs and will monitor the risks and performance of the GSEs. MBA will remain at the forefront of industry advocacy to ensure that any future changes to these agreements support sound, robust, single-family and multifamily mortgage markets.
For more information, please contact Pete Mills at (202) 557-2878.
2. FHFA Proposes Amendments to Address Concerns with GSE Capital Framework
Following Tuesday’s PSPA announcement, FHFA on Wednesday proposed revisions to the Enterprise Regulatory Capital Framework, which sets the regulatory capital requirements for Fannie Mae and Freddie Mac. The FHFA proposal addresses significant concerns expressed by MBA and others regarding the binding nature of the risk-insensitive leverage ratio and the punitive treatment of credit risk transfers.
- Why it matters: The GSE capital framework influences not only the safety and soundness of the companies, but also the cost and availability of mortgage credit in the conventional market. Some of the problematic features of the existing framework – which was finalized in late 2020 – may harm the GSEs’ ability to provide broad liquidity to the market or to distribute credit risk to willing sources of private capital.
- What’s next: Comments on the proposed rule will be due to FHFA 60 days following its publication in the Federal Register.
3. House Ways and Means Committee Action Advances Tax Portion of Reconciliation Package
The House Ways and Means Committee last week marked up key provisions related to infrastructure financing and community development, as well as a series of corporate and individual tax provisions. These specific “pay-fors” included, among other items, changes to small-business “pass-through” deduction tax rules (Section 199(a)) by limiting the deduction to $500,000 for joint filers and $400,000 for individual filers, raising the corporate tax rate, raising the top marginal personal income tax rate, raising the capital gains rate, and reforming international tax rules.
- Why it matters: Importantly, these Ways and Means-passed revenue raisers did not include changes to the taxation of capital gains on the sale of a home or a minimum book tax proposal that would negatively impact the value of mortgage servicing rights (MSR) assets.
- What’s next: While House Democrats have settled on pay-fors, there is no indication that Senate Democrats will simply rubber-stamp what the House prefers (including the overall size and scope of the final package). Senate Democratic leaders, including Finance Committee Chairman Ron Wyden (D-OR), are expected to reveal their own set of alternative tax proposals to complement/counter the Ways and Means package in the coming days and weeks.
4. House Financial Services Committee Holds Reconciliation Markup
On Monday and Tuesday, the House Financial Services Committee considered several bills, including the panel’s portion of a proposed $3.5 trillion budget reconciliation package. The committee voted along party lines to adopt a $322 billion package of increased spending for housing and other programs, in addition to emergency rental assistance program legislation.
- Why it matters: Included in the Committee’s reconciliation package are targeted funding streams for federally backed mortgage “innovations,” including an FHA small-dollar mortgage pilot program and a new 20-year mortgage product for first-generation homebuyers, a HUD program for first-generation homebuyer down payment assistance and housing counseling, green housing, and fair housing enforcement (among other investments). MBA’s letter on certain housing provisions included in the legislation can be found here.
- Also included in the markup were legislative proposals offered by both the majority and minority offices, including H.R. 5196, the Expediting Assistance to Renters and Landlords Act of 2021, as introduced by Chairwoman Maxine Waters (D-CA), and H.R. 3913, the Renter Protection Act of 2021, as introduced by Ranking Member Patrick McHenry (R-NC). MBA signed a joint trade association letter to House Financial Services Committee leadership in advance of the markup, which outlined recommendations to implement improvements to the distribution of ERAP funds to renters and landlords in need.
- What’s next: Timing on floor consideration of the $3.5 trillion proposal is unclear, as House and Senate leadership — as well as the White House — have been heavily engaged in negotiations on the tax reform, drug pricing, clean energy provisions, and total size of the package. Leaders will need to carefully navigate differences between the centrist and progressive sects of the party before a concrete timeline and strategy emerge.
5. Ginnie Mae Extends Delinquency Threshold Relief Through July 2022
Ginnie Mae announced it would extend exemptions made to Issuer delinquency thresholds that were implemented last year in response to the COVID-19 pandemic. These exemptions, originally outlined in All Participant Memorandum 20-06 (APM 20-06), now will be extended from January 31, 2022, through July 31, 2022 (June 2022 investor reporting). Ginnie Mae will continue to exclude any delinquencies occurring on or after April 2020, and will provide this exclusion automatically to Issuers that were compliant with Ginnie Mae’s delinquency rate thresholds as of its April 2020 investor accounting report.
- Why it matters: The extension of this temporary policy aligns with MBA advocacy and reflects the continued coordination and collaboration between MBA and Ginnie Mae during the COVID-19 pandemic.
- What’s next: MBA will continue to work with Ginnie Mae on policy responses to the pandemic to ensure a well-functioning market.
For more information, please contact Sasha Hewlett at (202) 557-2805.
6. Biden Administration Nominates Alanna McCargo for President of Ginnie Mae
This week, the Biden administration announced it would nominate Alanna McCargo as President at Ginnie Mae. McCargo currently serves as Senior Advisor for housing finance HUD. Prior to her role at HUD, McCargo served as vice president for the Housing Finance Policy Center at the Urban Institute. She has decades of experience in housing finance and much of her career has focused on finding solutions to equitably provide credit and capital to households and affordable housing stakeholders.
- Why it matters: Ginnie Mae is a critically important agency in our housing finance system and has not had a confirmed President since 2017. McCargo has a deep understanding of the agency and a demonstrated track record of working with industry, government, and housing advocates on key housing policy issues.
- What’s next: MBA looks forward to working with McCargo, and other senior staff at Ginnie Mae, on ways to enhance liquidity for Ginnie Mae mortgage-backed securities and help make affordable residential and rental housing a reality for millions of low- and moderate-income households.
For more information, please contact Sasha Hewlett at (202) 557-2805.
7. IRS Change to 4506-C – No Alterations or Markups to be Permitted
On August 9, the IRS notified tax transcript vendors of new requirements for submission of IVES Request for Transcript of Tax Return (i.e., 4506-C). Effective January 1, the IRS will require transcript requests to:
- Be clear of any editing marks;
- Only identify the transcripts, tax years, and/or taxpayers that need to be processed; and
- List the data on the assigned lines.
These changes are part of an effort to modernize IVES. It is expected that the changes will speed up the current process while limiting bottlenecks due to fluctuating volume.
- Why it matters: The IRS may reject submissions that do not meet its criteria. Lenders’ current systems and workflow may need to be altered to ensure compliance.
- What’s next: MBA will work with the IRS and IVES vendors to document expectations and convey these to our members.
For more information, please contact Rick Hill at (202) 557-2718.
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:
- Today’s Borrowers and Their Credit Scores: Findings from a New Research Study – September 21
- Capital Markets Update and Outlook for CMBS and Balance Sheet Lending – September 29
- Introduction and Walkthrough of MISMO’s Enhanced Logical Data Dictionary (LDD) – October 6
- Regulation F: Overview & Considerations – October 6
- Increasing Profitability: Transitioning to Delegated Underwriting and Improving Loss Mitigation – October 7
- Are We There Yet? CRE and LIBOR Transition Check-Up – November 4
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.