MBA Advocacy Update Tuesday June 21, 2022

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

On Wednesday, FHFA published its 2021 Annual Report to Congress, which provides details on the Agency’s activities over the course of the past year, including its actions as conservator of Fannie Mae and Freddie Mac.

By voice vote, the full Senate on Thursday confirmed Jaime Lizárraga and Mark Toshiro Uyeda to fill vacant slots at the Securities and Exchange Commission. And MBA announced that Laura Escobar, President of Lennar Mortgage, has been nominated to serve as MBA’s Vice Chair for the 2023 membership year.

FHFA Issues 2021 Annual Report to Congress

On Wednesday, the Federal Housing Finance Agency published its 2021 Annual Report to Congress, which provides details on the Agency’s activities over the course of the past year, including its actions as conservator of Fannie Mae and Freddie Mac. This year, the report highlighted FHFA’s efforts in areas related to affordable housing, the GSEs’ capital framework, housing supply, closing the racial homeownership gap, and the GSEs’ pricing frameworks. The legislative recommendations in the report include the need for Congress to complete the task of housing finance reform and advance the GSEs towards a responsible end to conservatorship. These legislative recommendations also include, as has been requested by FHFA for the past seven years, the recommendation that FHFA be granted examination authority over third-party service providers to the GSEs.

• Why it matters: The report provides a compilation of FHFA’s recent activities and ongoing priorities. The legislative recommendations focused on housing finance reform align with many of MBA’s long-running advocacy efforts. The recommendations related to FHFA examination authority over third-party service providers is a topic on which MBA remains heavily engaged, emphasizing previously that it would be highly inappropriate for any such reforms to grant FHFA this authority over lenders and servicers.
• What’s next: MBA will continue to partner with FHFA and the GSEs on the critical housing finance issues included in the 2021 report.

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

House Energy and Commerce Committee Holds Hearing on Bipartisan Data Privacy Legislation   

On Tuesday, the House Energy and Commerce Subcommittee on Consumer Protection and Commerce held a hearing on bipartisan data privacy legislation. The bill in focus, the American Data Privacy and Protection Act (ADPPA), creates a comprehensive data privacy framework that covers financial institutions. As expected, Republicans and Democrats were unified on the need to move forward with a national standard as provided in the legislation. A full summary of the hearing can be found here. 

• Why it matters: Several states and foreign jurisdictions have already adopted data security and data privacy regimes, which have resulted in a patchwork compliance regime.
• What’s next: Although Congress has grappled with the best way to approach data issues, the ADPPA is the first bipartisan bicameral proposal in recent years. The legislation is slated for an Energy and Commerce Committee markup in the coming months and could receive a full House vote before the end of the 117th Congress.

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

Senate Committee Holds Flood Insurance Hearing; Lawmakers Voice Mixed Concerns On Reform

On Thursday, the Senate Banking Committee held a hearing on reauthorizing the National Flood Insurance Program. Lawmakers expressed mixed views on proposals to overhaul the government’s flood insurance program. Last month’s Biden administration proposal, which called for dropping coverage for frequently flooded properties and denying coverage for homes and commercial properties in the most flood-prone areas, served as a backdrop for the hearing discussions. A summary of the hearing can be found here.

• Why it matters: For years, Congress has debated the need for reforms to modernize the financially beleaguered flood insurance program, with policymakers divided over the appropriate level of public subsidy needed.
• What’s next: The Senate Banking panel will hold an additional hearing next week – with the NFIP’s administrator appearing as the sole witness. There have been 21 short-term reauthorizations for the NFIP in recent years, and another brief reauthorization can be expected before the program lapses on September 30. 

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

House Advances Financial Services Bill on Racial Equity and Inclusion

On Wednesday, the House passed a House Financial Services Committee bill along party lines that seeks to promote racial and economic equity within the financial sector. Specifically, H.R. 2543, the Financial Services Racial Equity, Inclusion, and Economic Justice Act, would require the Federal Reserve Board of Governors to report on disparities in labor force trends, as well as its plans and activities to mitigate and eliminate these disparities.

• Why it matters: MBA strongly supports policies designed to reduce the racial homeownership gap, support sustainable homeownership for communities of color, and promote fair, equitable, and responsible lending for minority borrowers. MBA sent a letter to House leadership ahead of the vote that outlined provisions of concern and highlighted ways the bill could better achieve those aims. Lawmakers considered 27 amendments to the underlying bill before voting on final passage, including a provision that would task lenders with considering additional data not found on a credit report in the underwriting of a mortgage.
• What’s next: This House-passed bill is not expected to advance in the evenly divided Senate.

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

Laura Escobar of Lennar Mortgage Nominated to Be 2023 MBA Vice Chair

On Wednesday, MBA announced that Laura Escobar, President of Lennar Mortgage, has been nominated to serve as MBA’s Vice Chair for the 2023 membership year. She is expected to be installed at MBA’s 109th Annual Convention in Nashville, Tennessee, in October.

• Why it matters: Escobar is a 35-year real estate finance industry veteran who has held leadership positions with both bank-owned and independent mortgage companies overseeing all aspects of mortgage banking. Since 2018, she has been President of Lennar Mortgage, the mortgage lending subsidiary of Lennar Corporation, leading a team of more than 1,100 associates in 34 locations across 20 states. Escobar joined Lennar Mortgage in 2002 as Branch Manager; in 2004, she was promoted to Senior Vice President managing the Eastern Region; and in 2016, she became Executive Vice President, overseeing operations and production of the company’s Builder Division.
• Kristy W. Fercho, 2022 MBA Chair, and Executive Vice President and Head of Home Lending at Wells Fargo, said, “It is my pleasure to welcome Laura to MBA’s leadership ladder. She is a tireless advocate for mortgage lenders and their customers and is an inspired choice to lead MBA and its members. Her strategic mind, energetic personality, and deep compassion for others will ensure we continue to succeed in our members’ commitment to advancing homeownership and affordable rental housing opportunities nationwide.”

For more information, please contact Adam DeSanctis at (202) 557-2727.

GSEs Institute New Fee on Commingled Securities

Last week, Fannie Mae and Freddie Mac (the GSEs) announced a new 50-basis-point fee for commingled securities. 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.

• Why it matters: This fee has the potential to generate 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 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 is gathering additional information about this policy change and will engage in advocacy to ensure the continued smooth functioning of the UMBS market.

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

Ginnie Mae Extends Flexibilities on Delinquency Thresholds, Document Custodian Audits

On Thursday, Ginnie Mae issued two All Participants Memoranda extending pandemic-related flexibilities associated with delinquency thresholds and document custodian audits. The first APM continues an exemption that allows Ginnie Mae to exclude any delinquencies occurring on or after April 2020 when considering issuer delinquency threshold requirements. The second APM allows continued use of alternative audit procedures with respect to the physical inspection and observation of document custodians.

• Why it matters: Because issuers are required to report loans in COVID-19 forbearance as delinquent, the ongoing impact of the pandemic and the resulting national emergency could have increased the likelihood that some issuers would have exceeded Ginnie Mae’s delinquency threshold by virtue of implementing borrower forbearance as required. The continuation of this exemption will alleviate these concerns. Similarly, the use of alternative audit procedures will reduce concerns regarding the need for physical inspections during document custodian reviews while the national emergency remains in effect.
• What’s next: Ginnie Mae will provide the exemption on delinquency thresholds automatically through January 31, 2023 (December 2022 investor reporting). The use of alternative audit procedures is permitted for issuers whose fiscal year ends on or before September 30.

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

Ohio Governor Signs Remote Work Legislation, Wyoming Issues Guidance to Permit Work from a Remote Location

On Tuesday, Ohio Governor Mike DeWine (R) signed legislation (SB 264) that will permit mortgage loan originators (MLOs) to work away from a licensed branch location. SB 264 will go into effect on September 11. Earlier this month, the Wyoming Division of Banking issued a memorandum that clarifies its stance on remote work. The Division of Banking stated that it has no requirement that all regulated work activities be conducted within a licensed location. The Division of Banking, moreover, stated that if the employee lives within the commutable distance standard to the licensed location of the company, it has no objection to telework.

• Why it matters: SB 264 is consistent with the MBA model and other states that have acted to permit remote work. With the inclusion of Ohio and Wyoming, there are now 20 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 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.

Federal Reserve Raises Short-Term Interest Rates Again

On Wednesday, the Federal Reserve increased the benchmark federal funds rate three-quarters of a percentage point to a range between 1.5% and 1.75% and indicated plans for more rate hikes in upcoming meetings. In its bid to curb high inflation levels, the Fed’s 75-basis-point rate increase was the largest since 1994.

• According to Mike Fratantoni, MBA’s SVP and Chief Economist, “The Federal Reserve is racing to catch up to economic events, announcing a 75-basis-point increase and signaling more increases to come. A federal funds target rate likely to reach almost 4 percent by the end of 2023 should be effective in slowing the economy and ultimately bringing down inflation. The ongoing reduction in the size of the Fed’s balance sheet, including its holdings of MBS, is another factor putting upward pressure on mortgage rates.”
• Added Fratantoni, “The housing market has slowed considerably over the past month as rate increases have taken hold. We expect that this slower pace will remain through the summer, but buyers could return later this year if the Fed’s plans are better understood by the market and lead to less rate volatility.”

For more information, please contact Mike Fratantoni at (202) 557-2935.

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:

• CONVERGENCE: Understanding and Serving Today’s Buyer – June 23
• 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
• Latest on AML Regulations and Impact of Economic Sanctions – July 12

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.