MBA Advocacy Update Jan. 3, 2023

Bill Killmer; Pete Mills

Here is a summary of MBA advocacy efforts at the end of 2022:

Senate Passes VA Appraisal Modernization Legislation  

On Dec. 20, the Senate passed by unanimous consent H.R. 7735, the Improving Access to the VA Home Loan Benefit Act of 2022. The enactment of this MBA-endorsed legislation will help to ensure servicemembers, veterans and their families have access to more affordable, sustainable homeownership opportunities through the Department of Veterans Affairs’ Home Loan Program. The reforms included in H.R. 7735 will direct the VA to revisit existing program requirements to make appraisals more readily available and less cumbersome for buyers and lenders by requiring the VA to review appraisal certification requirements, encourage hybrid appraisals, employ emerging technologies, and revisit policies on property inspection waivers, minimum property requirements, and comparable sales. MBA President and CEO Bob Broeksmit, CMB, applauded the bill’s passage in a press statement.

  • Why it matters: MBA has strongly advocated for this bill and its Senate companion, S. 4208, throughout the year, including in May when Mark Jones, MBA’s current Chairman-elect, and CEO and Co-Founder of Amerifirst Home Mortgage, testified before the House Veterans’ Affairs Subcommittee on Economic Opportunity. After the House passed H.R. 7735 in September, MBA issued a Mortgage Action Alliance call to action that urged members to contact their senators to pass the legislation.
  • What’s next: MBA thanks all members who helped in the year-long advocacy effort. We will continue to work with the VA, Congress, members and other key stakeholders to ensure veterans and their families have access to more affordable, sustainable homeownership opportunities.

For more information, please contact Alden Knowlton at (202) 557-2741, Borden Hoskins at (202) 557-2712, Ethan Saxon at (202) 557 2913 or Tallman Johnson at (202) 557-2866.

Congress Advances Omnibus Spending Package for FY 2023 

The House on Dec. 23 passed the $1.7 trillion omnibus spending bill that funds the federal government through Fiscal Year 2023; the Senate passed the bill on Dec. 22. The legislation boosts agency budgets across the board and includes $858 billion for the military, more than $772 billion for domestic programs, approximately $45 billion in Ukraine aid and nearly $40 billion in disaster relief. Read a summary of provisions pertinent to MBA members here.  

  • Why it matters: In a press statement sent on Thursday, MBA President and CEO Bob Broeksmit, CMB, said that the spending package includes important housing provisions for which MBA has advocated. “We are especially pleased to see language that supports FHA IT modernization, manufactured housing construction, homeownership counseling, efforts to resolve delays in FHA multifamily pipeline funding, grants that encourage localities to remove legal and regulatory barriers that impede new construction, and the extension of the National Flood Insurance Program.”
  • What’s next: The package now awaits President Joe Biden’s signature. The new law, once enacted, will fully fund the federal government through September 30, 2023.

For more information, please contact Alden Knowlton at (202) 557-2741, Borden Hoskins at (202) 557-2712, Ethan Saxon at (202) 557 2913 or Tallman Johnson at (202) 557-2866.

FHFA Publishes Final Rule for New Enterprise Products and Activities

Late last month, the Federal Housing Finance Agency published its final rule for new Fannie Mae and Freddie Mac products and activities, which will require them to provide advance notice to FHFA of new activities and obtain prior approval before launching new products. The final rule, which is largely similar to the proposed rule, should enable the GSEs to serve their mission while maintaining safety and soundness, including through stakeholder input. Notable key changes include enhanced reviews of pilots, clarifications of what constitutes a substantially similar activity, and public disclosure requirements for FHFA. This final rule will replace the interim final rule that has been in place since July 2, 2009. Additional details can be found in FHFA’s fact sheet. Read MBA’s summary here

  • Why it matters: MBA has consistently advocated for a more transparent process by which the GSEs develop new activities and products or undertake pilots; these views were previously expressed in written comments submitted to FHFA in response to their Notice of Proposed Rulemaking in November 2020. MBA offered technical recommendations and emphasized the importance of innovation along with the need for transparency, efficiency, and the protection of proprietary information. FHFA addressed some of those topics in the final rule.  
  • What’s next: The final rule will be effective 60 days from the date it is published in the Federal Register. MBA will continue to engage with FHFA on this and other critically important housing issues. 

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

FHA Provides Clarity on its Conflict of Interest Policy

Late last month, the Federal Housing Administration issued Mortgagee Letter 2022-22 to provide clarification on its Conflict of Interest Policy for employees of mortgagees who execute multiple roles in the origination of FHA-insured loans. The ML clarifies that underwriters, appraisers, inspectors, and engineers are prohibited from having various roles or sources of compensation due to their direct impact on the mortgage approval decision. The ML will be incorporated into the FHA Single Family Housing Policy Handbook. 

  • Why it matters: Conflicts of interest in loan approvals could compromise FHA’s ability to manage the risk that industry professionals must assess when determining a borrower’s ability to repay. The revisions more closely align FHA policy on dual compensation with the GSEs. The ML from FHA was not expected, and MBA is evaluating it to assess its implications for FHA lenders.
  • What’s next: MBA will continue to engage with HUD on behalf of the industry to gain clarity on the requirements of the FHA Single Family Housing Policy Handbook. 

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

FHA Introduces COVID-19 HECM Repayment Plan

Late last month, FHA released ML 2022-23, which establishes the COVID-19 Home Equity Conversion Mortgage Property Charge Repayment Plan. The ML allows HEMC borrowers who attest they were impacted by the COVID-19 pandemic to enter a repayment plan lasting up to 60 months. HECM borrowers may be considered for the newly established repayment plan even if they are currently on a standard repayment plan or have been unsuccessful in one prior.

  • Why it matters: The new repayment plan provides an additional tool for servicers to assist borrowers who continue to be affected by the COVID-19 National Emergency.
  • What’s next: MBA will solicit feedback from members on any implementation concerns. 

For more information, please contact Brendan Kelleher at 202-557-2779.

Federal Reserve Board Adopts Final Rule Replacing LIBOR with SOFR; GSEs Follow Announcement with Guidance

Late last month, the Federal Reserve Board published its final rule that implements the Adjustable Interest Rate (LIBOR) Act by identifying benchmark rates based on the Secured Overnight Financing Rate, which will replace the London Interbank Offered Rate in certain financial contracts after June 30, 2023. The final rule is largely similar to the proposal and identifies replacement benchmark rates based on SOFR to replace overnight, one-month, three-month, six-month, and 12-month LIBOR in contracts, including U.S. contracts that do not mature before LIBOR ends and that lack adequate “fallback” language. The final rule also: reaffirms safe harbor protections contained in the LIBOR Act for selection or use of the replacement benchmark rate selected by the Board; clarifies who would be considered a “determining person” able to choose to use the replacement benchmark rate selected by the Board for use for certain LIBOR contracts; and ensures that LIBOR contracts adopting a benchmark rate selected by the Board will not be interrupted or terminated following LIBOR’s replacement. Following the announcement of the final rule, Fannie Mae and Freddie Mac issued additional guidance on replacement rates for their legacy LIBOR products. 

  • Why it matters: MBA has advocated for clear guidance for industry participants to facilitate a smooth LIBOR transition. The final rule is a key step necessary for the mortgage market to prepare for the cessation of LIBOR.
  • What’s next: The final rule will be effective 30 days from the date it is published in the Federal Register. MBA will continue to engage with its members and other industry stakeholders to ensure a smooth transition as the industry moves toward the LIBOR cessation date. 

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

Senate Votes on Key Housing Nominations

On Dec. 19, the Senate confirmed Martin Gruenberg to be Chairman and Board Member of the Federal Deposit Insurance Corporation by a 45-39 vote. Through unanimous consent, the Senate then confirmed the FDIC nominations of Travis Hill to be a Board Member and Vice Chairman, and Jonathan McKernan to be a Board Member. The Senate also voted by unanimous consent to confirm Kimberly Ann McClain as Assistant Secretary for Congressional and Intergovernmental Relations at HUD. 

  • Why it matters: The FDIC will have a full board for the first time since 2015, and is poised to focus on five top priorities, including reforms to the Community Reinvestment Act (CRA), climate change, the Bank Merger Act, crypto-asset, and the Basel III capital rule.
  • What’s next: MBA is following these developments and will utilize its CRA working group, Green Lending Roundtable, and other outreach to develop policy positions and responses to any regulatory proposals.

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

MBA, Coalition Comment on FTC’s Proposed Rule on Impersonation 

Last month, MBA and other trades filed a joint letter commenting on the Federal Trade Commission’s proposed rule to prohibit the impersonation of government, businesses, and their officials, and to prohibit entities from providing the “means and instrumentalities” for another to impersonate a government or business. In response to the increasing number of impersonation scams, the letter urges the FTC to finalize the proposed rule and once finalized, to initiate enforcement actions against entities and individuals that impersonate a business. 

  • Why it matters: Bad actors regularly impersonate banks, credit unions, and other financial service providers by illegally “spoofing” phone numbers belonging to these legitimate entities. The existing remedies are currently insufficient to combat such impersonation scams. Accordingly, the letter urges the FTC to review existing remedies and to finalize a rule as soon as possible. 
  • What’s next: MBA will continue to monitor the rulemaking and will inform members when a rule is finalized. 

For more information, please contact Alisha Sears at (202) 557-2930.

Ohio Legislature Passes Bill to Subordinate Residential PACE Liens to Mortgages

Late last month, the Ohio Legislature cleared a bill that includes a provision that would establish the lien priority of residential mortgages to a PACE (property assessed clean energy) loan. With the support of the Ohio MBA and MBA, House Bill 364 is now awaiting consideration by Gov. Mike DeWine (R). If approved, Ohio would become the second state to subordinate PACE liens to residential mortgages, following Minnesota’s 2018 law.

  • Why it matters: PACE loans upend traditional lien priority, exposing investors and guarantors to increased loss severities. For this reason, PACE liens are banned in housing programs offered through the GSEs, FHA, and VA.
  • What’s next: MBA and the Ohio MBA will continue to advocate for increased protections against the well-document problems with residential PACE loans, including strong consumer protections from fraud and abuse. 

For more information, please contact William Kooper (202) 557-2737.

Illinois Proposes Sweeping New CRA Rules for IMBs, Community Banks, Credit Unions; MBA, Illinois MBA Request Comment Period Extension

Late last month, the Illinois Department of Financial and Professional Regulation published proposed rules to implement the Illinois Community Reinvestment Act. The rule establishes three entirely new regulatory structures – one each for state-charted banks, credit unions operating in Illinois, and entities licensed pursuant to the Illinois Residential Mortgage License Act of 1987. The nearly 170-page proposed regulation raises numerous concerning issues, and MBA and the Illinois MBA will collaborate to develop comments ahead of the January 31, 2023, due date. However, both organizations this week sent a letter to IDFPR urging it to extend the comment period to 120-days. The 45-day comment period stands in sharp contrast to the nearly 160 days IDFPR provided for comments on its seven-page advanced notice of proposed rulemaking in 2021. 

  • Why it matters: Illinois is the first of two new states to mandate CRA for independent mortgage banks following a 2008 Massachusetts law. It is vital that this series of entirely new regulatory mandates remain consistent to reduce the regulatory burden and costs on member companies, especially given the proven results IMBs have demonstrated in expanding their reach to minority and low-and moderate-income borrowers during the last decade. MBA believes strong IMB performance in lending to LMI borrowers and communities should be used to establish a presumption of compliance with the new rules and be factored into exam cycles. 
  • What’s next: MBA expects New York, California, and likely other states to propose CRA rules or legislation in the near future. 

For more information, please contact William Kooper (202) 557-2737.

New York Foreclosure Bill Opposed by Industry is Delivered to Governor

Last month, despite the best advocacy efforts by our industry, legislation (A7737) was sent to Gov. Kathy Hochul (D) that will prohibit New York servicers from unilaterally halting a foreclosure action and restarting the loan’s statute of limitations in order to offer homeowners with loss mitigation opportunities.  A7737 was fiercely opposed by the MBA, New York MBA and their respective members because it would remove a valuable tool our industry uses to offer federally backed loss mitigation options to homeowners experiencing financial hardship.  

  • Why it matters: A7737 would abrogate the well-reasoned ruling of New York’s highest court in the Freedom Mortgage v. Engel case and make it harder for lenders to keep people in their homes. Complicating matters, the New York Post published an article detailing how the bill’s sponsor has vested interested in A7737 becoming law. 
  • What’s next: If signed as delivered, MBA and NYMBA will push for chapter amendments to be introduced and passed during the beginning of the 2023 legislative session, which will reinstate the ability to unilaterally halt a foreclosure action to help consumers. MBA and NYMBA will continue to advocate for our industry on this issue and will pursue all opportunities to mitigate the problematic provisions of this law.

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

  • Ten Things Your Company Must Do in 2023 – January 18
  • Using the MISMO API Toolkit to Build Your Own FIPS Code Lending API – January 26
  • Combating the Downturn: Strategies to Optimize Borrower Support in Recessionary Environments – January 31
  • Home Equity Lending: An Assessment of Today’s Market Landscape & Cashout Opportunities – February 9
  • Five Steps to Improve Efficiency, Compliance and Automation in Your Mortgage Operations – February 16

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.