MBA Advocacy Update Aug. 22 2022

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

On Wednesday, FHFA and Ginnie Mae jointly released their long-awaited final capital, liquidity, and net worth requirements for sellers and servicers of loans backed by the GSEs and Ginnie Mae issuers. Also last week, the author of legislation in California (SB1323), that would have created a byzantine new foreclosure process for residential properties that have more than 10% equity withdrew his bill from Assembly floor consideration. MBA and the California MBA strongly opposed the bill, which had already passed the full Senate and the Assembly Judiciary and Appropriations Committees.

FHFA, Ginnie Mae Issue Final Capital, Net Worth and Liquidity Standards for IMBs

On Wednesday, the Federal Housing Finance Agency and Ginnie Mae jointly released long-awaited final capital, liquidity and net worth requirements for sellers and servicers of loans backed by Fannie Mae and Freddie Mac and Ginnie Mae issuers. These requirements will apply to all independent mortgage bank seller/servicers and Ginnie issuers, with certain additional standards being placed on large servicers – those with servicing portfolios greater than $50 billion.

The final standards incorporate numerous key MBA recommendations including:

• Allowing 50% of the unused portion of committed agency servicing advance lines of credit to count toward the liquidity calculation (up from the proposed zero);
• Reducing the “origination liquidity” requirement significantly, and exempting from it smaller lenders with less than $1 billion in originations;
• Aligning baseline standards and recognizing the differences in remittance type (lower requirements on actual remittance compared to scheduled);
• Eliminating the pro-cyclical non-performing loan liquidity “kicker”;
• Limiting the need for liquidity buffers to large institutions, and allowing the buffers to be accessed without prior permission from the GSEs;
• Aligning base capital requirements for both FHFA and Ginnie at 6%, down from FHFA’s proposal of 9%;
• Aligning net worth requirements at $2.5 million plus 25 bps for enterprise and PLS/Other servicing and 35 bps for Ginnie servicing; and
• Extending the proposed 6-month implementation timeline for these requirements to September 30, 2023, for most requirements and longer for certain others.   

Ginnie Mae did not eliminate its risk-based capital requirement as MBA urged, but did lower the standard from 10% to 6%.

For a more detailed summary of the proposal, including how it compares to existing requirements and prior proposals, please see here.

• Why it matters: These requirements play a substantial role in the financial planning and risk management practices of seller/servicers and issuers. MBA has long acknowledged the importance of ensuring resiliency and stability, while also noting the need for any such requirements to be tailored appropriately to the risks presented in the market. In prior comments to FHFA and Ginnie Mae, we have highlighted concerns with counterproductive incentives, procyclical requirements that exacerbate liquidity in stressed markets, and excessive liquidity requirements that could undermine market stability rather than strengthen it. Each of these points was acknowledged and reflected in the updated proposal.
• What’s next: Significant additional analysis will be needed to fully assess the impact on the IMB sector and the housing finance market broadly. We will continue work with our members and FHFA, Ginnie Mae and the GSEs to refine these standards and to address any questions or issues that arise during implementation.

For more information, please contact Pete Mills at (202) 557-2878 or Sasha Hewlett at (202) 557-2805.

Unworkable California Foreclosure Bill Withdrawn by Sponsor

On Thursday, the author of legislation in California (SB1323) that would have created a byzantine new foreclosure process for 1-4 family properties with more than 10% equity (based on an appraisal ordered by the trustee) withdrew his bill from consideration. MBA and the California MBA strongly opposed the bill, which had already passed the full Senate and the Assembly Judiciary and Appropriations committees. These efforts included a Mortgage Action Alliance Call to Action earlier this week, in which more than 800 California MAA members urged their legislators to vote “no” on the bill. The bill’s flaws were also highlighted in a recent trade association coalition letter. Under the bill’s provisions, servicers would have been required to hire a randomly selected real estate agent to list and attempt to sell the secured property (without the borrower’s permission) for its appraised value. Only if that effort failed to produce a qualifying offer could a lender proceed to foreclosure. 

• Why it matters: This development is a victory for coordinated industry advocacy on a bill that would have created an unworkable foreclosure process that would have hurt lenders, servicers, investors, guarantors and borrowers. The bill also would have upended well-established state law relating to nonjudicial foreclosure, which has been carefully designed as a fair, open and public, and efficient process for lenders to recover their security in the event of default. 
• What’s next: MBA and the California MBA will continue to collaborate on this issue, and other issues being debated in the state’s legislature.

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

mPower Moments: On Breaking Glass Ceilings with Morgan Stanley’s Carla Harris 

In this episode of mPower Moments, mPower Founder Marcia M. Davies sits down with Carla Harris, Managing Director and Senior Client Advisor at Morgan Stanley. During this inspirational conversation, Harris discusses her career path and how she was able to climb the corporate ladder on Wall Street. She highlights several pivotal moments that helped redefine her authenticity and leverage her voice when facing adversity.

• Why it matters: Harris also notes the importance of “trusting your gut” when taking career risks, and measuring the impact the risk can have when going to the next level. Furthermore, she provides actionable steps the real estate finance industry can take to provide minority women with more leadership opportunities.
• What’s next: To watch more mPower Moments, please click here.

For more information, please contact Marcia Davies at (202) 557-2707.

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.