MBA Advocacy Update July 5, 2022

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

Last week, The Wall Street Journal published a letter to the editor from MBA President and CEO Bob Broeksmit, CMB, highlighting how Special Purpose Credit Programs are an effective way for lenders to help serve minority homebuyers safely and sustainably.

Also last week, the full House Financial Services Committee and its Subcommittee on Oversight & Investigations held hearings focused on the affordable housing crisis. And on Wednesday, the CFPB released an advisory opinion interpreting federal law to prohibit debt collectors, as defined by the Fair Debt Collection Practices Act, from charging customers so called “pay-to-pay” fees.

Join the 300+ MBA member companies that have signed MBA’s Home for All Pledge, representing a commitment to promoting minority homeownership; affordable rental housing; and company diversity, equity, and inclusion. One senior executive (e.g., CEO, COO, President, Head of Mortgage, SVP) is encouraged to sign this online form on behalf of your organization.

New WSJ LTE by MBA President and CEO Bob Broeksmit, CMB: How to Help Minorities Buy Their First Home

The Wall Street Journal published a letter to the editor from MBA President and CEO Bob Broeksmit, CMB, highlighting how Special Purpose Credit Programs (SPCPs) are an effective way for lenders to responsibly help serve minority homebuyers without undue risk to taxpayers.

• Why it matters: The letter was written in response to a June 13 editorial that was critical of components of Fannie Mae and Freddie Mac’s (the GSEs) Equitable Housing Finance Plans, including the commitment to expand the use of SPCPs.
• What’s next: Last week, MBA and the National Fair Housing Alliance (NFHA) announced a new online toolkit for mortgage lenders interested in developing Special Purpose Credit Programs (SPCPs). View the toolkit here.

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

MBA Continues Engagement on New GSE Fee on Commingled Securities

In response to the announcement earlier this month by Fannie Mae and Freddie Mac (the GSEs) of a new 50-basis-point fee for commingled securities, MBA has continued to engage with the Federal Housing Finance Agency (FHFA) and the GSEs to raise awareness of potential risks to market liquidity. The fee will apply to Supers or real estate mortgage investment conduit (REMIC) securities issued by one GSE that include Uniform Mortgage-Backed Security (UMBS) collateral issued by the other GSE. The fee is structured to apply only to the portion of the Super or REMIC backed by the other GSE’s collateral. Following advocacy by MBA and other market participants, FHFA Director Sandra Thompson yesterday issued a statement noting that the Agency “will be exploring alternatives to ensure the long-term viability of UMBS, including conducting a review of the [GSE capital framework]…” Director Thompson also clarified that the fee will remain in place during this review.

• Why it matters: This fee has the potential to generate significant frictions in the UMBS market, as it could impact the fungibility of Fannie Mae- and Freddie Mac-issued collateral that underpins the design of the UMBS. The GSEs noted that this fee is being implemented in response to a provision of their new capital framework, which assigns a 20 percent risk weight to their exposures to securities issued by the other GSE. In comments submitted in 2020, MBA recommended that no risk weight be applied to such exposures, as “any difference between the required capital for a [GSE’s] own securities relative to those issued by another [GSE] could lead to different treatment and actions that weaken the aggregate UMBS market.”
• What’s next: These fees take effect for securities issued on or after July 1, 2022. MBA is gathering market intelligence and communicating regularly with FHFA and the GSEs. MBA’s advocacy efforts will remain focused on ensuring a well-functioning UMBS market.

For more information, please contact Dan Fichtler at (202) 557-2780 or Sasha Hewlett at (202) 557-2805.

House Financial Services Committee Holds Hearings on Affordable Housing Crisis

This week, the full House Financial Services Committee (HFSC) and its Subcommittee on Oversight & Investigations held hearings focused on the affordable housing crisis. The full committee hearing included discussions surrounding appraisal algorithmic bias, institutional investors and PE firms, the Low-Income Housing Tax Credit (LIHTC), alternative credit scoring, and local zoning issues. The Subcommittee hearing focused its attention on the issue of private equity (PE) firms that have purchased single-family rental (SFR) properties in large quantities to lease to tenants.

• Why it matters: Democrats discussed how institutional investors are targeting minority and low-income neighborhoods to buy single-family homes and convert them to rentals, exacerbating housing supply problems. Committee Democrats also recommended more investments in housing through legislation. Conversely, Republican members denied that PE firms posed a problem to the housing market, argued that high inflation deters homeownership, and criticized Democratic proposals they believe would artificially increase buyer demand without adequately addressing issues related to housing supply.
• What’s next: Given the challenges in affordability and other headwinds facing the housing market, additional hearings and potential legislation aimed at affordable housing solutions remain possible. More complete summaries of the hearings can be found here.  

For more information, please contact Borden Hoskins at (202) 557-2712 or Alden Knowlton at (202) 557-2741.

CFPB Issues Advisory Opinion Banning Convenience Fees Under the FDCPA 

On Wednesday, the Consumer Financial Protection Bureau (CFPB) released an advisory opinion interpreting federal law to prohibit debt collectors, as defined by the Fair Debt Collection Practices Act (FDCPA), from charging customers what the Bureau labels “pay-to-pay” fees. The Bureau had previously articulated this position in amicus briefs and MBA has filed a brief in opposition to the Bureau’s position in one of these cases that is still pending. The Bureau’s advisory opinion defines convenience fees as fees that are charged to consumers by a debt collector for accepting a consumer’s debt payment through an online portal or over the phone. Section 808 of the FDCPA prohibits debt collectors from collecting any amount that is not expressly authorized by the underlying agreement or permitted by law. The advisory opinion finds these types of convenience fees are an “amount” that federal law prohibits and that state law being silent on the particular fee is not grounds to overcome the prohibition.

• Why it matters: In many situations, mortgage servicers are deemed to be “debt collectors” under the FDCPA. Consequently, servicers should carefully review the advisory opinion to ensure their convenience fee policies comply with the new policy. Convenience fees are charged to compensate servicers for the costs associated with providing alternative payment options and encourage innovation in providing services.
• What’s next: This interpretive rule will become effective once it is published to the Federal Register. MBA will follow up with guidance and next steps in response.

For more information, please contact Justin Wiseman at (202) 557-2854 or Gabriel Acosta at (202) 557-2811.

HUD Releases Updates to FHA Single Family Housing Policy Handbook 4000.1

On Wednesday, the U.S. Department of Housing and Urban Development (HUD) released an update to the Federal Housing Administration (FHA) Single Family Housing Policy Handbook, providing additional industry guidance to originators and servicers.

For originators, the updates primarily consisted of policy clarifications and revised language concerning handbook definitions. Notably, the Handbook update removes the requirement that information submitted by a borrower obtained via the internet must include a URL, a recommendation proposed by MBA in a recent letter. Among the servicer updates, FHA incorporated guidance previously outlined in Mortgagee Letters, including providing clarification on recoverable property preservation expenses, and permission for borrowers with outstanding partial claims to cancel their Mortgage Insurance Premium.

• Why it matters: Incorporating guidance from Mortgagee Letters directly into the Handbook on a regular basis is essential for maintaining a central point of policy authority. MBA appreciates FHA’s efforts to clarify and streamline language in the Handbook, consistent with our recommendations.
• What’s next: Unless otherwise noted, changes to the Handbook may be implemented immediately, but must be implemented by September 26, 2022. MBA will continue to engage with HUD on additional changes to the FHA Handbook through the Government Loan Servicing Subcommittee and FHA Subcommittee.

For more information, please contact Brendan Kelleher at (202) 557-2779 or Darnell Peterson (202) 557-2922.

Senate Committee Continues Flood Insurance Hearings with Little Consensus on Reforms

As lawmakers consider reauthorizing the National Flood Insurance Program (NFIP) ahead of its expiration on September 30, 2022, the Federal Emergency Management Agency (FEMA) urged Senators to adopt broader reforms to the program. Testifying before the Senate Banking Committee last week, acting NFIP administrator David Maurstad laid out more than a dozen initiatives for the beleaguered program, such as dropping coverage for frequently flooded properties and denying coverage for homes and commercial properties in the most flood-prone areas. A summary of the hearing can be found here.

• Why it matters: Consistent with previous hearings, lawmakers from both political parties appeared to have serious reservations with various elements of FEMA’s legislative reform proposal.
• What’s next: Another short-term reauthorization for the NFIP – following almost two dozen stop-gap reauthorizations in recent years – is expected before the program lapses on September 30, 2022. The last long-term reauthorization of the program (the “Biggert-Waters” reforms) were enacted in 2012. 

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

Legislation to Revise California Foreclosure Process Advances over Industry Opposition 

On Wednesday, a California bill (SB1323) strongly opposed by the real estate finance industry was amended and approved by the Assembly Judiciary Committee, after passing the Senate in May. The bill would create a new foreclosure process for residential properties that have more than 10% equity, based on an appraisal ordered by the trustee. Under the process, servicers would be required to hire a real estate agent to sell the secured property for its appraised value on a Multiple Listing Service (MLS) before completing the foreclosure and without the borrower’s express permission. If approved, this would radically change the nonjudicial foreclosure process in the nation’s largest real estate market.

• Why it matters: MBA and the California MBA strongly oppose the bill and have been working together to call attention to the bill’s flaws with state legislators and federal housing program staff. Ahead of this week’s hearing, a coalition of industry trade associations submitted a letter detailing numerous issues with the bill. The bill would upend well established 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: If the current draft is approved by the Assembly, it will need a concurring vote in the Senate. MBA and the California MBA will continue to oppose the bill through all appropriate means.

For more information, please contact William Kooper at (202) 557-2737, Kobie Pruitt at (202) 557-2870 or Grant Carlson at (202) 557-2765.

MBA Urges Governor Hochul to Veto Legislation Harmful to New York Borrowers

On Thursday, MBA sent a letter to New York Governor Kathy Hochul to request that she veto passed legislation (A7737/S5473) that would abrogate the well-reasoned ruling by the New York Court of Appeals in Freedom Mortgage Corporation v. Engel, ending a lender’s right to unilaterally undo a mortgage acceleration after default and stop the statute of limitations to enforce the mortgage from accruing. The Foreclosure Abuse Prevention Act (FAPA) would put servicers and investors at risk if they decelerate a loan in order to offer home retention options to the borrower.

• Why it matters: Because the bill is retroactive, servicers could lose their right to foreclose on thousands of protracted foreclosures in New York that are at risk of running past the statute of limitations. If FAPA is signed by Governor Kathy Hochul, lenders may be unable to provide needed loss mitigation efforts to keep homeowners in their homes.
• What’s next: MBA will continue to work with the New York MBA to communicate our grave concerns with FAPA and encourage the governor to veto the legislation. In addition, MBA and NYMBA will advocate for future amendments to FAPA that can be introduced during a special session this summer or the next legislative session.

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

Rhode Island Passes Remote Work Legislation, Heads to Governor for Signature

Late last week, the Rhode Island legislature passed legislation (HB 7781) that will permit mortgage loan originators (MLOs) to work away from a licensed branch location. HB 7781 will now head to Governor Daniel McKee for his signature and will go into effect once the bill is signed.

• Why it matters: HB 7781 is consistent with the MBA model and other states that have acted to permit remote work. If HB 7781 is signed, there will be 21 states that have enacted legislation, promulgated rules, or issued regulatory guidance that permanently allows MLOs to work from a remote location.
• What’s next: MBA will continue to work with our state and local association partners to advocate for its model legislation and regulation to create licensing flexibility nationwide.

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, 2022. 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:

• Effective Internal Audit Function: Beyond the Basics – July 11
• Latest on AML Regulations and Impact of Economic Sanctions – July 12
• Do Commercial Servicer Ratings Matter? – July 14
• 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

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.