MBA Advocacy Update July 18 2022
Last Monday, MBA and a broad coalition of business interests sent a joint letter to congressional leaders stressing strong opposition to tax increases targeted at “pass-through” small business entities. Later in the week, Senator Joe Manchin, D-W.V., also weighed in on tax matters, reportedly casting serious doubt on the future of tax provisions as part of any “slimmed-down” Build Back Better reconciliation package.
On Wednesday, MBA submitted a statement for the record ahead of a House subcommittee hearing on the Community Reinvestment Act, highlighting our opposition to extending the statute’s requirements to IMBs. And on Thursday, MBA participated in a panel discussion with Democratic members of the House Financial Services Committee on issues regarding Property Assessed Clean Energy lending.
MBA, Coalition Urge Congress Not to Raise Taxes on “Pass-Through” Small Businesses; Manchin Reportedly Rejects Tax Increase Elements in Ongoing Reconciliation Negotiations
In recent weeks, President Biden’s signature tax and reconciliation proposal has come into sharper focus on Capitol Hill, with Democrats hoping ongoing negotiations between Senate Majority Leader Chuck Schumer (D-NY) and Senator Joe Manchin (D-WV) might finally produce a revised, “slimmed-down” agreement to advance key elements of the administration’s Build Back Better economic agenda. On Monday, MBA and a broad coalition of business interests sent a letter to congressional leaders stressing strong opposition to proposals that would increase taxes on “pass-through” small business entities. A copy of the letter can be found here.
- Why it matters: As the top-line amount of revenue and spending in any politically viable package shrinks, congressional leaders have been considering various “pay-fors,” including expanding the 3.8% Net Investment Income Tax (NIIT) to apply to a broader array of S Corps, LLCs and other small business “pass-through” entities – including businesses owned and managed by many MBA members.
- What’s next: Reports indicate that Manchin rejected a package of proposed energy-and climate-related investments – to be paid for by tax increases such as a NIIT expansion and/or a minimum book tax on GAAP income – in favor of an even smaller package that would instead reduce prescription drug prices and extend expiring health care subsidies. MBA will remain closely engaged with key lawmakers as these discussions continue between now and the end of the current fiscal year (September 30).
House Panel Examines Interagency Proposal on Community Reinvestment Act (CRA) Reforms
On Wednesday, the House Financial Services Committee’s Subcommittee on Consumer Protection and Financial Institutions held a hearing, “Better Together: Examining the Unified Proposed Rule to Modernize the Community Reinvestment Act.” Democrats persistently raised the theme of historical redlining and the need for CRA updates that focus on race and ethnicity as determining factors in bank CRA evaluations. Republicans countered that basing CRA exams on anything other than geographical focus may well be unconstitutional (absent explicit statutory changes).
MBA submitted a statement for the record ahead of the hearing, highlighting our support for modernizing CRA evaluations, including ensuring banks get full CRA credit for the entire array of mortgage banking activities. MBA also expressed opposition to extending CRA requirements to independent mortgage banks (IMBs). The statement emphasized that IMBs already serve a large percentage of minority and low -and moderate-income borrowers, do not accept deposits, and do not receive the direct federal benefits (e.g., deposit insurance, Federal Home Loan Bank advances, emergency loans from the Federal Reserve) received by CRA-covered banks.
- Why it matters: On May 5, the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. announced a joint proposal to “strengthen and modernize” the CRA. The proposed rule includes changes to the types of activities that qualify for CRA credit and the methodology for evaluating a bank’s activity.
- What’s next: Congress is likely to continue pressuring regulators to finalize the rule in the coming months. MBA will continue monitoring the congressional debate while gathering the necessary member feedback to submit a comment letter on behalf of the real estate finance industry.
MBA Briefs House Financial Services Committee on PACE Legislation
On Thursday, MBA participated in a panel discussion with majority staff and Democratic members of the House Financial Services Committee on issues applicable to Property Assessed Clean Energy lending. MBA panelists Alden Knowlton, Justin Wiseman and Kobie Pruitt discussed a range of concerns mortgage lenders and servicers have with residential PACE lending models. Issues raised included the incomplete regulatory oversight of PACE lending and the safety and soundness concerns posed when homeowners take on more energy efficiency-related debt than they can sustainably afford.
- Why it matters: MBA believes energy-efficient home improvements can be beneficial for homeowners, but significant concerns exist when these improvements are financed with PACE loans – a structure that lacks vital consumer protections and presents lien priority risks to lenders, investors, and guarantors. While the Consumer Financial Protection Bureau continues to work on implementing its authority to subject residential PACE loans to Truth in Lending Act consumer protections, MBA believes federal legislation is needed to require PACE loan subordination to federally related mortgages.
- What’s next: MBA advises members to educate consumers about better alternatives for financing energy-efficient home improvements, including existing home equity products and energy efficiency products backed by the GSEs.
House Passes National Defense Authorization Act Without MBA-Supported RON Provisions
On Thursday, the House passed the Fiscal Year (FY) 2023 National Defense Authorization Act package that funds the Department of Defense and other government military operations. Last year, MBA worked with members of the House Armed Services Committee, as well as House leadership from both parties, to ensure that language to create minimum federal standards for the use of remote online notarization (RON) – the bipartisan, bicameral SECURE Notarization Act – was included as part of the FY22 NDAA. That same amendment was not accepted in the FY23 package yesterday, but the standalone House SECURE Act bill (H.R. 3962) is currently advancing through the House Energy and Commerce Committee, which has jurisdiction over this legislation.
- Why it matters: H.R. 3962 was passed by the House Energy and Commerce Subcommittee on Consumer Protection and Commerce last month and will be considered in a full committee markup next week. MBA continues to advocate for the consideration and swift passage of this standalone bill on the House floor, although it still faces several hurdles in the Senate. MBA signed a joint letter of support for the RON amendment earlier in the week. Additionally, MBA sent a letter outlining support and opposition for several proposed amendments that were considered within the broader NDAA package.
- What’s next: The Senate is likely to consider its own version of the NDAA in the coming months. After Senate passage, the two chambers will conference on a final bill that ultimately will head to President Joe Biden’s desk for enactment. MBA will continue advocating for the inclusion of the RON provision in the Senate legislation, while advocating for swift passage of a standalone measure in both chambers. For the latest developments on MBA’s efforts to pursue RON laws in the states, please visit www.mba.org/RON.
Michael Barr Confirmed as New Fed Vice Chair for Supervision
On Wednesday, the Senate voted 66-28 in two separate votes to confirm the nomination of Michael S. Barr to serve a four-year term as Vice Chairman for Supervision of the Board of Governors of the Federal Reserve System, as well as a 10-year “regular” term as a member of the Federal Reserve Board.
- Why it matters: The Fed is implementing a much more aggressive approach at combatting inflation through a series of anticipated interest rate hikes. Barr’s confirmation gives the Fed a full Board membership for the first time since 2013.
- What’s next: The Fed will continue to use its monetary policy levers to try and instigate a “soft landing” for the economy, focusing on taming inflation without too much disruption to labor markets. Barr is expected to lead the Fed’s evaluation of the risks that large financial institutions pose to economic stability during a recession.
HUD Extends Appraisal Validity Period
On Tuesday, HUD released Mortgagee Letter 2022-11. The ML provides revised lender and servicer guidance regarding the Federal Housing Administration appraisal validity period. Appraisals for originations, including HECMs, with case numbers assigned after June 1, and appraisals for servicing and loss mitigation with case numbers assigned on or after July 12, will now have an initial appraisal validity period extension from 120 days to 180 days from the effective date of the appraisal report. The ML also extends the appraisal update validity period from 240 days to 360 days (for originations only) from the effective date of the initial appraisal report.
- Why it matters: The appraisal validity period establishes the maximum time mortgagees may use an appraisal report for an FHA-insured mortgage.
- What’s next: MBA will continue to engage with FHA on issues related to appraisals.
For more information, please contact Darnell Peterson at (202) 557-2805.
LIBOR Transition Fallback Rates to be Published; ARRC Releases Guide on Legacy LIBOR-Based Cash Products
Last week, the Alternative Reference Rates Committee – the group convened by the Federal Reserve to facilitate the transition away from the London Interbank Offered Rate – welcomed the announcement that Refinitiv will begin publishing fallback rates based on the Secured Overnight Financing Rate (SOFR) in September. Separately, the ARRC released its LIBOR Legacy Playbook – a guide that provides tools and resources to assist market participants with the transition for existing, LIBOR-indexed loans.
- Why it matters: The fallback rates published by Refinitiv will serve as the ARRC’s recommended fallback rates. For legacy contracts in which ARRC-recommended fallback language was incorporated, these contracts will convert to the SOFR-based rates published by Refinitiv upon the cessation of LIBOR, which is expected on June 30, 2023. The LIBOR Legacy Playbook, meanwhile, addresses three important areas of focus for market participants to ensure a smooth transition for existing loans: contract assessment, contract remediation, and fallback communication and implementation.
- What’s next: Refinitiv will publish indicative prototypes of the fallback rates through June 30, 2023, which will allow servicers to transition and test their systems. With less than a year before the expected cessation of LIBOR, servicers should be in advanced planning for the transition of existing, LIBOR-indexed loans. MBA will continue to work with regulators and market participants to ensure a smooth transition.
For more information, please contact Dan Fichtler at (202) 557-2780.
North Carolina Governor Signs Legislation to Permanently Allow RON; Delaware Passes Bill to Permit Remote Notarization
On Monday, North Carolina Gov. Roy Cooper signed legislation (H776) that will permanently allow use of remote online notarization in real estate financing transactions. In addition, the Delaware legislature passed a bill (SB 262), which will also permit RON. H776 and SB 262 are generally consistent with the MBA-ALTA model bill.
- Why it matters: North Carolina becomes the 41st state to enact RON. Attorney-closing states like North Carolina have been reticent to adopt RON. MBA believes the enactment of H776 could be a catalyst to getting the remaining attorney-closing states to pass their own respective RON laws that are safe and consistent with state requirements.
- What’s next: In Delaware, SB 262 must now be signed by Gov. John Carey to become law. MBA will continue to work with ALTA and local partners to encourage the remaining states to adopt RON laws.
For more information, please contact Kobie Pruitt at (202) 557-2870.
REGISTER: VOICES: Courageous Conversations with Men of Color
MBA is pleased to extend its award-winning webinar series, Voices: Courageous Conversations with Women of Color, to include a new conversation focusing on the male experience. Hear from a dynamic and diverse lineup of male industry leaders on their personal journeys throughout their careers. This timely conversation will inspire and inform while giving voice to the challenges and lessons learned.
- What’s next: The next installment of VOICES is July 19. Register here.
For more information, please contact the DEI team.
Are You a Diversity Champion? Apply for MBA’s DEI Leadership Awards
MBA’s Diversity, Equity and Inclusion (DEI) Leadership Awards are back! Now in its seventh year of recognizing MBA member companies, this awards program acknowledges the dedication and creativity that increase DEI efforts within a company’s leadership and employee base. If your organization is a champion of diversity, share how you are inspiring change and highlight your success by applying today.
- What’s next: Applications are due August 5. Prior to getting started, please review application tips to help you prepare your entry.
For more information, please contact MBA’s DEI Team.
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:
- Tech Stack Optimization: Analyzing Efficiencies in the Current Economic Landscape – July 19
- Mortgage Servicers: Take Back Control to Accelerate and Modernize Borrower Communications – July 21
- Special Purpose Credit Program Toolkit: Overview and Walkthrough – July 21
- Managing Single-Family Retail Originations in Today’s Volatile Mortgage Market – July 27
- Commercial Real Estate Property Insights – Where are We Now? – August 11
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.