MBA Advocacy Update Feb. 7 2022

Bill Killmer; Pete Mills

Three of President Biden’s nominees to serve on the Federal Reserve’s Board of Governors faced questioning during their confirmation hearing before the Senate Banking Committee Thursday.

Last Friday, MBA submitted a joint trades letter to FHA on its proposed changes to the Servicing Defect Taxonomy section of its Single-Family Housing Policy Handbook. And MBA SVP and Chief Economist Mike Fratantoni penned a guest column in HousingWire looking at the increasingly competitive nature of the mortgage market and how it has changed over time.

Fed Board Nominees Face Questions On Independence, Inflation

Lawmakers on Thursday questioned three nominees to the Federal Reserve Board of Governors on issues around Fed independence, climate change and inflation during a confirmation hearing before the Senate Banking Committee. Sarah Bloom Raskin, nominated last month by President Joe Biden to serve as the Fed’s vice chair for supervision, drew the most attention, particularly from Republicans who oppose her nomination. Those Republicans, including Sen. Pat Toomey of Pennsylvania, the committee’s ranking member, worried Raskin would use her influence at the Fed to regulate capital allocation within the financial system. Also appearing before the committee were nominees Lisa D. Cook, a professor of economics and international relations at Michigan State University; and Philip N. Jefferson, vice president for academic affairs, dean of faculty and the Paul B. Freeland professor of economics at Davidson College, to serve on the Fed board. A summary of the hearing can be found here.

  • Why it matters: While much of Thursday’s hearing revolved around Raskin’s past calls for the Fed to address climate change, all three nominees told lawmakers that the Fed must make it a priority to tackle currently high inflation. 
  • What’s next: Republican opposition to the nominees could impede their confirmation in the closely divided Senate. Moderate Democrats on the Senate banking panel – who hold the key to confirmation – signaled their support for the nominees, including Raskin.

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

GSEs Relax Pandemic-Era Requirements for Self-Employed Borrowers

On Wednesday, Fannie Mae and Freddie Mac released a lender letter and bulletin, respectively, announcing expiration of certain additional income verification requirements applied to self-employed borrowers due to the COVID-19 pandemic. These requirements are being retired for cases in which the borrower’s most recent federal income tax returns are not older than 2020. Lenders should note that pandemic-era requirements related to verification of self-employment (i.e., verifying that the business is still operating) continue to apply.

  • Why it matters: The pandemic-era requirements included documentation of an audited year-to-date profit-and-loss statement or an unaudited statement combined with multiple months of business depository account statements. While the pandemic created an additional layer of uncertainty with respect to self-employed borrowers, many industry participants felt that these requirements were too onerous and resulted in restricted access to credit for a large population of consumers.
  • What’s next: The majority of pandemic-era policies have been rescinded, and MBA continues to work with the GSEs to identify flexibilities that should be maintained or reinstated – embodied, for example, in recent GSE announcements (see Freddie Mac’s latest update here; Fannie Mae’s here) permitting greater use of desktop appraisals.

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

MBA Submits Comments on Proposed FHA Servicing Defect Taxonomy

Last Friday, MBA, the Housing Policy Council and the American Bankers Association submitted a joint letter to the Federal Housing Administration on its proposed changes to the Servicing Defect Taxonomy section of FHA’s Single-Family Housing Policy Handbook. The letter notes that while the industry welcomes FHA development of a servicing defect taxonomy, the current proposal lacks enough detail and clarity to provide the increased certainty that servicers need to effectively manage FHA servicing risks. The trades urged FHA to work with stakeholders in an iterative process to develop a clear and detailed framework for analyzing servicing defects.

  • Why it matters: A detailed and balanced Servicing Defect Taxonomy will enhance fairness and predictability, reduce FHA servicing costs, and encourage more lenders to participate in the FHA program.
  • What’s next: MBA will continue to work with its sister trades and FHA to develop a workable solution.

For more information, please contact Sara Singhas at (202) 557-2826.

MBA’s Mike Fratantoni in HousingWire: The Mortgage Market Has Become More Competitive 

MBA Chief Economist Mike Fratantoni penned a guest column in HousingWire this week looking at the increasingly competitive nature of the mortgage market and how it has changed over time. It presented different ways to measure the level of competition in the industry before and after the Great Financial Crisis, including by examining the number of competitors, market share of smaller lenders since 2005, using a U.S. Department of Justice calculation on market concentration, and whether incumbents/market leaders can sustain above market returns for extended periods.

  • Why it matters: The Consumer Financial Protection Bureau has said in recent press statements and in a January 26 request for public comment that it has heightened concerns about “lack of competition” in financial markets. In fact, the mortgage market is highly competitive based on the most common measures of competitiveness and has become increasingly so over the past 10 years when compared to the period before and after the GFC.  
  • What’s next: The scope of the CFPB’s information request was broad, covering a wide range of financial services fees, including several fees potentially found in mortgage servicing or origination transactions. An MBA-prepared summary of the request for comment is available here. MBA will work with its members to present compelling data about mortgage market competitiveness, including Fratantoni’s findings. Comments are due on or before March 31.

For more information about the research, please contact Mike Fratantoni at (202) 557-2935. For more information about CFPB’s RFI, please contact Justin Wiseman at (202) 557-2854 or Blake Chavis at (202) 557-2930.

Remote Work Flexibilities Advance in Pennsylvania, Kansas  

On Thursday, Pennsylvania Governor Tom Wolf (D) signed legislation (HB 1588) that will permit mortgage loan originators to work away from a licensed location. HB 1588 passed unanimously in both the House the Senate prior to being signed by the governor. The MBA of Eastern Pennsylvania, through its advocacy, were successful in getting HB1588 passed and signed into law.  

Earlier in the week, MBA’s Kobie Pruitt presented testimony before the Kansas House Financial Institutions and Rural Development Committee to express support for legislation (HB 2568) that would permit Kansas MLOs to work away from a licensed branch. HB 2568 was introduced on behalf of the Kansas Office of the State Bank Commissioner, which was developed in collaboration with MBA and the Kansas real estate finance industry. The bill was unanimously supported by those providing testimony.

  • Why it matters: The provisions of both Pennsylvania HB 1588 and Kansas HB 2568 are consistent with the MBA model and other states that have acted to permit remote work.
  • What’s next: HB 1588 becomes effective in 60 days. In regards to the Kansas bill, it must now be voted on by the full committee prior to moving to the house floor. MBA will continue to work with our state and local partners to advocate for its passage.

For more information, please contact 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:

  • Fair Lending and Redlining, Part I – Overview of Regulations and Enforcement – February 7
  • Mortgage Servicing Spotlight: Best Practices for Managing Borrower Communications – February 8
  • Fair Lending and Redlining, Part II – Managing and Maintaining Your Compliance Program – February 9
  • Fair Lending and Redlining, Part III – Opportunities and Moving Forward – February 10
  • Successful Recruiting in a Changing Marketplace – February 10
  • Commercial Insurance Issues and Problems 2022 – February 15
  • The Last Mile for LIBOR – February 17
  • CONVERGENCE: The 2022 Legislative Outlook for Affordable Housing – February 17

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.