MBA Advocacy Update June 27, 2022
Last week, the House Financial Services Committee once again considered down payment assistance legislation targeted toward first generation, first-time homebuyers. On Tuesday, MBA and the National Fair Housing Alliance announced a new online toolkit for mortgage lenders interested in developing Special Purpose Credit Programs.
Also last week, Federal Reserve Chair Jay Powell delivered his semi-annual report on monetary policy and the current state of the economy via House and Senate testimony. Additionally, bills regarding HUD funding, data privacy and remote online notarization were all considered by two key House subcommittees.
And on Friday, the GSEs issued guidance to lenders and other market participants to address erroneous borrower credit scores that were provided from March 17 – April 6, due to coding errors by Equifax.
MBA, NFHA Launch Online Toolkit to Help Lenders Develop SPCPs for Underserved Communities
On Tuesday, MBA and the National Fair Housing Alliance announced a new online toolkit for mortgage lenders interested in developing Special Purpose Credit Programs. SPCPs permit lenders to offer mortgage credit to economically and socially disadvantaged borrowers and are an important tool for ensuring financial institutions can meet the needs of their consumers.
- Why it matters: The online toolkit, which was developed with technical assistance from the Homeownership Council of America (HCA) and input from the Urban Institute, provides background information, best practices and guidance, industry examples, data, and other useful links to aid mortgage lenders in their work in developing SPCPs.
- What’s next: To learn more about the SPCP toolkit, click here.
For more information, please contact Justin Wiseman at (202) 557-2854.
GSEs Provide Guidance on Equifax Coding Errors Impacting Credit Scores
On Friday, Fannie Mae and Freddie Mac issued guidance to lenders and other market participants to address erroneous borrower credit scores that were provided from March 17 – April 6, due to coding errors by Equifax. This guidance provides welcome updates in three important areas: 1) lenders are not required to obtain updated credit reports, re-underwrite loans, or re-assess underwriting decisions based solely on this issue; 2) erroneous credit scores used at the time of underwriting do not render loans ineligible for purchase; and 3) repurchase requests will not be issued based solely on this issue. For impacted loans, loan-level pricing adjustments will be based on the recalculated representative credit score (i.e., the simulated score provided by Equifax).
- Why it matters: Through this guidance, the GSEs have addressed several of the key concerns related to resolution of this issue. As was advocated by MBA, the GSEs are not requiring lenders to re-assess underwriting decisions, impacted loans remain eligible for rep-and-warrant relief, and repurchase requests will not be made based solely on this issue. The instructions provided by the GSEs give lenders greater clarity on steps they should be taking with respect to impacted loans.
- What’s next: This guidance is effective immediately and applies to all loans impacted by the Equifax coding errors. Lenders should review the guidance carefully and follow the instructions provided by the GSEs. MBA will continue to work with the Federal Housing Finance Agency, the GSEs and members to ensure smooth implementation of this process, including the implementation of any future pricing adjustments. MBA also will continue to seek guidance on remediation of costs borne by industry participants due to these errors.
House Financial Services Committee Holds Legislative Markup
On Wednesday and Thursday, the House Financial Services Committee (HFSC) considered and marked up 10 bills addressing a broad range of issues. Of note, included in the markup was H.R. 4495, the Downpayment Toward Equity Act, as re-introduced by Chairwoman Maxine Waters (D-CA). The bill is a proposal designed to help address the U.S. racial wealth and homeownership gaps by providing $100 billion towards down payment assistance for first-generation homebuyers. MBA, along with a broad coalition of industry and advocacy partners, continues to support efforts to reduce down payment barriers for first-time, first-generation, and minority homebuyers.
- Why it matters: MBA successfully secured the inclusion of language within the bill (as reintroduced) to provide uniform administration of the down payment assistance (rather than 50 separate state processes) and grant participating lenders a meaningful legal safe harbor should borrowers self-attest their first-generation homebuyer status and later be determined ineligible. MBA sent a letter of support to committee members ahead of the markup.
- What’s next: The bill was favorably reported out of committee on a party line vote. MBA will continue to closely monitor the legislation’s possible progress – either as included within a broader package of bills or as a standalone measure.
Fed Chair Powell Testifies Before Congress
On Wednesday and Thursday, Federal Reserve Chair Jay Powell testified before the House Financial Services and Senate Banking Committees. Powell answered several questions related to inflation, supply chains, tough LIBOR legacy contracts, and the state of the U.S. housing market. In response to questions from Sen. Bill Hagerty (R-TN) and Rep. Brad Sherman (D-CA), Powell said the Fed has not decided when to sell off its holdings of mortgage-backed securities, but remains committed to a transition (over time) resulting in a balance sheet that predominantly includes U.S. Treasury instruments. He affirmed the Fed is willing to sell off its MBS holdings at a loss and that “these losses are not a [key] monetary policy consideration.” He also asserted that the Fed’s ultimate actions on MBS would not have much more of a material impact on mortgage rates.
- Why it matters: The Fed is implementing a much more aggressive approach at combatting inflation through a series of anticipated interest rate hikes.
- What’s next: The Fed will continue to use its monetary policy levers in an effort to instigate a “soft landing” for the economy, focusing on taming inflation without too much disruption to the labor market.
House T-HUD Subcommittee Advances HUD Funding Legislation during Markup
Yesterday, the House Transportation, Housing and Urban Development (T-HUD) Subcommittee considered the text of its initial appropriations draft bill, which includes robust funding for the U.S. Department of Housing and Urban Development for Fiscal Year (FY) 2023. Last month, MBA sent a letter to the chairs and ranking members of the full House Appropriations Committee and T-HUD Subcommittee, highlighting MBA’s views on the real estate finance industry’s priorities within the bill, including the need for direct funding to upgrade HUD’s information technology needs, especially for the Federal Housing Administration’s Project Catalyst.
- Why it matters: The proposal contains substantial funding for FHA cybersecurity and IT upgrades, Ginnie Mae administrative expenses, and housing counseling.
- What’s next: This markup is an initial step toward eventual House and Senate negotiations on final FY23 HUD funding levels (as part of a broad, omnibus spending package to fund all federal agencies). The full Appropriations Committee will consider this bill next week, with a planned vote in the House on all 12 appropriations bills before the August recess. With Congress unlikely to reach agreement to move all 12 appropriations bills before September 30, 2021, legislators will almost certainly need to pass a “stop-gap” Continuing Resolution to keep the government operating beyond October 1, 2021.
House Energy and Commerce Committee Advances Data Privacy and Remote Online Notarization (RON) Legislation
On Thursday, the House Energy and Commerce Subcommittee on Consumer Protection and Commerce held a markup that included consideration of data privacy legislation (known as the American Data Privacy and Protection Act (ADPPA) and minimum federal RON standards (the Securing and Enabling Commerce Using Remote and Electronic (SECURE) Notarization Act). The ADPPA creates a new data privacy and security regime which could apply to financial institutions not in compliance with the Gramm-Leach-Bliley Act (GLBA). The SECURE Act creates a federal standard for the use of remote online notarization (RON). MBA joined two coalition letters sent to committee members prior to the markup, the first outlining concerns with the ADPPA, and the second reiterating support for the SECURE Act.
- Why it matters: Both bills advanced through the subcommittee without any opposition.
- What’s next: Both bills are slated for a second markup before the full Energy & Commerce Committee in the coming weeks. Other House and Senate committees will potentially come forward with competing data privacy proposals. MBA will continue to advocate for our members’ interests as debate on these bills moves forward.
FHFA Provides Further Details on Credit Score Model Timeline; Commits to Engagement with Industry
In response to a letter submitted by MBA and several other industry associations, FHFA provided additional details on its plans to update the credit score model requirements for Fannie Mae and Freddie Mac. The joint letter to FHFA and the GSEs urged them to provide the industry with a detailed transition plan for the move to one or more new credit score models, and with the necessary data and ample time to implement new model(s). FHFA’s response noted that it anticipates “implementation to take 18 to 24 months if moving to a new single credit score environment and at least 36 months for a multi-score environment.” FHFA also noted that the Agency and the GSEs are “committed to continuing our extensive engagement with stakeholders” during the planning and implementation phases of this effort.
- Why it matters: The transition to one or more new credit score models for GSE-backed loans is an important initiative that will take extensive resources on the part of FHFA, the GSEs, and the broader mortgage industry. MBA has advocated for a deliberate implementation process and timeline, which would minimize the potential for market disruption.
- What’s next: FHFA and the GSEs are expected to finalize updates to the credit score model requirements of the GSEs this year. MBA will remain deeply engaged on implementation issues to ensure smooth market functioning during the transition to one or more new models.
For more information, please contact Dan Fichtler at (202) 557-2780.
MBA Continues Advocacy on New GSE Fee on Commingled Securities
Last week, Fannie Mae and Freddie Mac) announced a new 50-basis-point fee for commingled securities. The fee will apply to Supers or real estate mortgage investment conduit securities issued by one GSE that include Uniform Mortgage-Backed Security 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. Over the past week, MBA has engaged in discussions with representatives from FHFA and both GSEs, as well as many market participants, to better assess potential market impacts and adverse consequences for the UMBS. Yesterday, FHFA Director Sandra Thompson issued a statement reiterating the Agency’s commitment to the UMBS framework.
- 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: 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. These fees will take effect for securities issued on or after July 1, 2022. Market participants seeking to issue commingled securities prior to July 1 are instructed to contact the GSEs prior to doing so.
MBA Submits Comments VA Servicer Tier Ranking
On Tuesday, MBA submitted comments to the U.S. Department of Veteran’s Affairs on the Advance Notice of Proposed Rulemaking on the development of a servicer tier ranking program. MBA believes this “scorecard” should be simple, actionable, sustainable, and aligned with other agency scorecards. A scorecard should measure the quality of service provided to assist veteran homeowners and a servicer’s ability to implement VA’s default servicing policy.
- Why it matters: The VA scorecard outlined in the ANPR would assign servicers a tier ranking that would determine the value of incentives a servicer can recover for completing a loss mitigation solution. A Tier 1 ranking will be assigned to best performing servicers and receiving the highest incentives. A Tier 4 ranking will be assigned to the least satisfactory servicers and will not receive any incentives.
- What’s next: The Spring 2022 Agenda indicates VA expects to move to a proposed rule by May 2023. MBA will remain engaged with VA throughout the rulemaking process.
MBA Urges VA to Extend COVID-19 Partial Claim program
On Tuesday, MBA submitted a letter requesting that the VA extends their COVID-19 Partial Claim program past its current expiration date. MBA believes that an amended partial claim program should be available throughout the length of the national emergency declaration and should be considered as a permanent option moving forward. If this program is extended, the Partial Claim program should align with similar loss mitigation options available to FHA and U.S. Department of Agriculture (USDA) borrowers.
- Why it matters: The VA COVID-19 Partial Claim program is currently set to expire on October 28,2022. Currently, about 249,000, or 2.1% of FHA and VA loans remain in forbearance and that 20,000 of these plans are expected to expire per month through 2022.
- What’s next: MBA will continue to engage with the VA to emphasize the importance of extending the COVID flexibility and will update members on next steps.
OIRA Releases Spring 2022 Regulatory Agenda
On Wednesday, the Office of Information and Regulatory Affairs (OIRA) released the Spring 2022 Regulatory Agenda outlining the scheduled timeline for several rulemaking processes for the administrative agencies. The rulemaking process cover agencies of particular concern to MBA and our members, including the Consumer Financial Protection Bureau (CFPB), FHFA, HUD, VA, and USDA.
- Why it matters: The Regulatory agenda is generally a reflection of the priorities of the Administration and the leaders of the respective agencies. The rulemaking announcements concern recent MBA initiatives, including:
- From HUD, FHA plans on releasing the 40-year Term for Loan Modification rule in March 2023. The 40-year term will be important in a higher rate environment.
- CFPB is expected to proceed to a notice of proposed rulemaking (NPRM) on AVMs in December 2022.
- USDA is expected to release a proposed rule to delegate loan approval authority to lenders imminently (June 2022).
- FHFA is also expected to release their NPRM on Federal Home Loan Bank (FHLB) Membership in June 2022
- What’s next: MBA will continue to provide comments to proposed rulemaking and will monitor any new regulatory changes.
MBA Selects Philadelphia as its Third CONVERGENCE City
Last Friday, MBA announced that Philadelphia has been selected as the site for its next CONVERGENCE initiative, a place-based partnership focused on narrowing the racial homeownership gap. CONVERGENCE Philadelphia will launch in early 2023, joining CONVERGENCE initiatives in Memphis, Tennessee, and Columbus, Ohio.
- Why it matters: CONVERGENCE Philadelphia will be led by MBA and three cornerstone partners: Finance of America, Radian, and Wells Fargo Home Mortgage. The multiyear commitment will involve key community and industry stakeholders working together to identify and address homeownership barriers for people and communities of color.
- What’s next: To learn more about CONVERGENCE, click here.
For more information, please contact Steve O’Connor at (202) 557-2867.
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:
- Leveling Up Your Social Media Strategy with Paid Advertising – June 28
- How to Navigate Lower Margins and a Tighter Market Through Effective Leadership and Embracing Technology – June 28
- Equity Entry Point: Shifting Today’s Mortgage Opportunities from Purchase to Equity – June 30
- Effective Internal Audit Function: Beyond the Basics – July 11
- Latest on AML Regulations and Impact of Economic Sanctions – July 12
- Tech Stack Optimization: Analyzing Efficiencies in the Current Economic Landscape – July 19
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.