MBA Advocacy Update Aug. 15, 2022: House Passes Inflation Reduction Act of 2022

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

On Tuesday, FHFA announced Fannie Mae and Freddie Mac will require servicers to obtain and maintain fair lending data on their loans. Last Friday, MBA submitted its comment letter to federal regulatory banking agencies on the Community Reinvestment Act. And the House approved the Senate’s amended substitute to H.R. 5376, now known as the Inflation Reduction Act, which President Biden is expected to sign into law this week.

House Passes Inflation Reduction Act of 2022; Legislation Awaits President Biden’s Signature 

On Friday, the House passed the Senate’s amended substitute to H.R. 5376, now known as the Inflation Reduction Act of 2022, by a party-line 220-207 vote. The measure, which excludes many items included in various Build Back Better Act proposals offered during the past 18 months, now heads to President Joe Biden’s desk for his signature. 

The Inflation Reduction Act of 2022 incorporates MBA-supported language that preserves the current deferred timing of taxation on income derived from both residential and multifamily mortgage servicing rights related to $8 trillion of unpaid principal balance (UPB) — through an exclusion from a newly instituted 15% corporate minimum book tax. The book tax language also excludes certain subsidiary firms from its coverage, as offset by extending loss limitations for noncorporate taxpayers for two additional years.   

• What’s in it: Written summaries of the legislation provided by MBA staff and the Congressional Research Service can be found here and here, respectively. The package – designed to address climate change, healthcare costs, and deficit reduction – is paid for through corporate tax hikes over 10 years by: (1) implementing a 15 percent corporate “minimum book tax” on GAAP income (for firms with declared net income over $1 billion for any consecutive three-year period); (2) increasing IRS tax enforcement funding; (3) allowing Medicare to negotiate lower prescription drug prices; and (4) imposing a 1 percent excise tax on stock buybacks. 
• What’s out: Importantly, after extensive collaboration with an MBA Board-approved, “blue ribbon” member Tax Task Force – and over 18 months of persistent MBA advocacy, the legislation does not include a host of harmful revenue raisers that would have been detrimental to member companies and real estate finance. These include:
• broad changes to the tax treatment of “pass-through” entities, such as an expansion of the 3.8 percent Net Investment Income Tax or limits to the current Section 199(a) 20 percent deduction against Qualified Business Income;
• a cap on 1031 Like-Kind Exchanges;
• broad changes to capital gains treatment, in combination with the use of ”stepped-up” basis;
• broad changes to the deductibility of business interest;
• an enhanced FICA tax regime;
• altered treatment of the gain on sale from a home; and
• changes to the capital gains treatment of “carried interest.”

What’s next: MBA thanks members from the broad spectrum of capital sources, business models, and segments of the real estate finance industry who remained deeply engaged during this process to buttress our association’s tax policy and advocacy efforts.

MBA will continue to push for targeted investments and tax credits that were not included in H.R. 5376 that would have meaningful impacts on housing supply and demand, real estate investment, and our members’ business operations.

For more information, please contact Bill Killmer at (202) 557-2913, Pete Mills at (202) 557-2878, or Mike Flood at (202) 557-2745

FHFA to Require Servicers to Maintain Fair Lending Data

On Tuesday, the Federal Housing Finance Agency announced Fannie Mae and Freddie Mac will require servicers to obtain and maintain certain fair lending data elements on loans they service for the GSEs. Specifically, servicers must maintain certain HMDA data – race, ethnicity, age, and gender – plus language preference information from the Supplemental Consumer Information Form for each mortgage loan originated on or after March 1, 2023. The data must be maintained in a format that can be searched, queried, and transferred. In the event of a servicing transfer occurring on or after March 1, 2023, the servicer must deliver to the transferee servicer the fair lending data elements obtained during the origination process for mortgages originated on or after March 1, 2023 (i.e., servicers do not need to backfill data for loans originated before the effective date of this requirement). Fannie Mae’s announcement is here. Freddie Mac’s announcement is here. 

• Why it matters: Tuesday’s announcement follows and aligns with FHFA’s May announcement that requires Fannie Mae and Freddie Mac to use the SCIF to collect information about a borrower’s language preference. This announcement clarifies the GSEs’ data expectations for their servicers and any servicing transfers after implementing the SCIF. 
• What’s next: Fannie Mae and Freddie Mac’s announcement is effective for all mortgages originated on or after March 1, 2023. MBA will continue to clarify implementation issues or challenges with FHFA and the GSEs. 

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

MBA Submits Comments on Community Reinvestment Act Proposed Rule

On August 5, MBA submitted comments on the federal banking agencies’ (the “Agencies”) proposed rulemaking to reform and align the Community Reinvestment Act. MBA expressed support for the objectives to update the framework to address changes in banking and technology, make CRA assessments more objective, and align the rules across the Agencies. MBA also made a number of substantive and technical recommendations to ensure that mortgage banking activities – purchases of new and seasoned mortgages, investments in MBS, and certain Ginnie Mae related activities – receive full credit under the new rules. MBA also expressed support for recognizing and encouraging Special Purpose Credit Programs in CRA ratings. To mitigate cost burdens and unintended consequences, MBA recommended: allowing small banks to continue to be evaluated under the current CRA framework; allowing intermediate banks to be subject only to the new Retail Lending Test; and to provide flexibility for these institutions to opt-in to some of the new CRA tests in the proposal. For large banks, MBA recommended recalibrating aspects of the rule to properly balance the new tests and ensure these institutions can reasonably obtain high ratings through their efforts. 

• Why it matters: While there is broad consensus on the need to align the rules, modernize the framework, and make ratings more transparent, CRA reform efforts require careful balancing of compliance burdens. Moving to more objective, data-driven ratings is also fraught with unintended consequences. MBA’s comments seek to address these concerns, with a specific focus on their impact on housing finance. 
• What’s next: MBA will continue constructive engagement with the banking agencies on developing a modernized CRA regulatory framework that banks can comply with, and regulators can implement to ensure the credit needs of LMI borrowers and communities are fully served.

For more information, please contact Fran Mordi at (202) 557-2860.

Ginnie Mae Announces Plans to Boost Housing Supply

This week, Ginnie Mae announced steps it will undertake to support the Biden administration’s efforts to combat the nation’s historic shortage of affordable housing. These steps, which stem from President Joe Biden’s Housing Supply Action Plan and HUD recently launched “Our Way Home initiative”, include: 1) making the Risk Share Initiative a permanent program within the Ginnie Mae MBS ecosystem; 2) expanding Ginnie Mae’s securitization guarantee to mission-driven community lending; and 3) considering policy changes that support the financing of manufactured housing and accessory dwelling units.

• Why it matters: MBA has remained engaged in efforts to improve the nation’s affordable housing supply; these actions are a positive step towards closing the supply shortfalls.
• What’s next: MBA will continue to engage with Ginnie Mae on this and other critically important housing issues.

For more information, please contact Sasha Hewlett at (202) 557-2860.

Ginnie Mae Revises Capital Requirements for Credit Unions and Housing Finance Agencies

Last week, Ginnie Mae announced updates to its capital requirements for federally insured credit unions and state housing finance agencies (HFAs). Ginnie Mae stated that these changes, outlined in an All Participant Memorandum 22-08), will harmonize their program requirements with standards enforced by other federal entities and also better reflect the unique financial status of state housing agencies. APM 22-08 also adjusts the capital standards calculation of total assets by excluding the value of loans that are eligible but not yet bought out of a securities pool, and makes an update to clarify that if an issuers’ eligibility requires the support of a corporate parent, that parent must meet the financial requirements of a Ginnie Mae issuer.

• Why it matters: These changes recognize the strength of both the federal prudential regulation of credit unions and the state sponsorship of HFAs. Both institutions play important roles in community lending, particularly in underserved areas. 
• What’s next: All changes announced in this APM will be effective on December 31. MBA will continue to work with Ginnie Mae on this and other critically important policy issues.  

For more information, please contact Sasha Hewlett at (202) 557-2860.

CSBS Releases Nonbank Cybersecurity Examination Programs

On Tuesday, the Conference of State Bank Supervisors issued the Baseline Nonbank Cybersecurity Examination Program and the Enhanced Nonbank Cybersecurity Examination Program to assist organizations in improving their cybersecurity posture.

• Why it matters: State examiners will utilize these programs while supervising financial institutions. State-licensed IMBs should consider reviewing the exam programs to help evaluate their own cybersecurity preparedness and compliance with various regulations, and to prepare for forthcoming state exams.
• What’s next: MBA will collaborate with CSBS to provide opportunities to obtain additional information on the examination programs.

For more information, please contact Rick Hill at 202-557-2718 or William Kooper at 202-557-2737.

MBA Participates in State Regulator Conference; Urges Action on Remote Work and Other Industry Issues

This week, at the Annual Conference of the American Association of Residential Mortgage Regulators (AARMR), MBA team members spoke on several occasions, addressing multiple industry priorities. MBA Chief Economist Mike Fratantoni, and Vice President of Industry Technology Rick Hill, respectively, spoke to the current state of the mortgage industry and protection from cybersecurity threats. Additionally, MBA Director of State Government Affairs Kobie Pruitt urged regulators to embrace remote work flexibilities for state licensed mortgage loan originators, and asked regulators to become more engaged in state legislative efforts to alter foreclosure procedures in ways that expose the GSEs, FHA, and VA to excessive risk and could undermine access or raise costs for these important programs. Industry representatives also discussed the need for more fact-based debates in states regarding the potential application of CRA requirements to non-banks.

• Why it matters: The AARMR conference is the only annual gathering of state mortgage banking regulators. The first-in person conference since the pandemic was attended by 140 state regulators.  
• What’s next: Using the momentum from direct regulator engagement, MBA will continue to pursue remote work flexibilities in all remaining states that do not currently allow them under their laws or rules and will continue to push back on efforts to extend CRA requirements to IMBs.

For more information, please contact William Kooper at (202) 557-2737 or Kobie Pruitt at (202) 557 2870.

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:

• Vertical Sophistication: Meeting the Challenge of Today’s Market – August 23
• C-PACE Financing 101: A Commercial/Multifamily Lender’s Overview – August 23
• Risk and Compliance Management: Are You Covered? – August 24
• CONVERGENCE: What Does it Cost to Produce a Unit of Housing?: Costs & Elements of Production – August 25
• The Power of Reverse Mortgages for a Changing Market – September 1
• Climate Risk Management: Data & Analytics – September 7

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.