MBA Advocacy Update May 16, 2022

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

On Wednesday night, Julia Gordon was confirmed by the Senate to be the Assistant Secretary for Housing and FHA Commissioner at HUD. MBA President and CEO Bob Broeksmit, CMB, penned a new blog post discussing how policymakers can empower mortgage lenders to deliver more relief to borrowers. Also last week, U.S. Treasury Secretary Janet Yellen testified before Congress on FSOC’s annual report.

New To the Point with Bob Blog Post: How Policymakers Can Empower Mortgage Lenders to Deliver More Relief to Borrowers

This week, MBA President and CEO Bob Broeksmit, CMB, penned a new blog post on how policymakers can empower mortgage lenders to deliver more relief to borrowers.

Why it matters: The timely post comes after a debate broke out recently among industry commentators about the meaning and importance of mortgage lender margins in passing through low interest rates during the COVID-19 pandemic. What is not up for debate are the 25 million borrowers served and the more than 6.5 million homeowners who were able to get back on track with their mortgage payments.

What’s next: As policymakers consider lessons learned and prepare for future emergencies, Broeksmit explains that the best bet is to remove the barriers that prevent lenders from rapidly scaling up to meet customer demand when rates fall sharply. Those recommendations include:

1. The Federal Housing Finance Agency and the GSEs should remove underwriting, appraisal, and other operational barriers for streamlined rate/term refis, including for borrowers in government-mandated forbearance.
2. The Consumer Financial Protection Bureau should facilitate streamlined rate reduction refis by providing an exemption from the Ability to Repay rule for loans that reduce interest rates and payments without exposing borrowers to greater default risk.
3. Encouraging state policymakers to facilitate more remote work options; and
4. Ensuring policymakers and mortgage lenders collaborate to enact more digital solutions, from e-notes and automated appraisals to remote online notarizations and digital signatures.

For more information, please contact Pete Mills at (202) 557-2878.

Senate Confirms Julia Gordon, Jay Powell, and Two Additional Fed Nominees  

Last week, the Senate confirmed several nominees that will affect the real estate finance industry in the coming years. As inflationary undercurrents continue to ripple through the economy, Jerome Powell overwhelmingly secured a second term as Fed Chair Thursday by a 80-19 vote. Philip N. Jefferson, a college administrator and academic, was confirmed to the Federal Reserve’s Board of Governors on Wednesday. He is the third of President Joe Biden’s nominees to secure a spot on the Fed’s seven-person board: Lisa D. Cook was confirmed as a Governor on Tuesday, and Lael Brainard was confirmed as the Fed Vice Chair last month. Also on Wednesday, the Senate narrowly confirmed Julia Gordon to be HUD Assistant Secretary for Housing and Federal Housing Administration Commissioner by a 51-50 vote. MBA, in addition to its letter of support, issued a statement from President and CEO Bob Broeksmit, CMB, congratulating Gordon on her nomination.

• Why it matters: At FHA, Gordon inherits a department that insures over $1.2 trillion in single-family forward and reverse mortgages. FHA has been without a confirmed FHA commissioner since January 2021.
• What’s next: The administration’s nominee for the final open Fed job – the Vice Chair for Supervision – is Michael Barr, a former key Obama Treasury official, who will have a nomination hearing next Thursday.

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

Treasury Secretary Yellen Testifies Before Congress 

This week, U.S. Treasury Secretary Janet Yellen testified before both the Senate Banking and House Financial Services committees on the Financial Stability Oversight Council’s annual report. The FSOC report states that “nonbank mortgage companies continue to rely on short-term wholesale funding and may have limited ability to absorb shocks.” Notably on Tuesday, Senator Catherine Cortez Masto (D-NV) asked Secretary Yellen to “address the financial stability risk to our economy posed by the increase in nonbank mortgage companies providing residential home financing.” Yellen responded that she does “see some risks relating to the role of nonbanks in the mortgage market.” On both Tuesday and Thursday, Yellen also provided an update on the implementation of London Interbank Offered Rate (LIBOR) transition legislation, inflation, the risk climate change poses to the financial system, and her views on the housing market, saying, “My guess is that house prices will begin to level off in the not-too-distant future, but we do have a significant housing problem.” More complete summaries of both hearings can be obtained here and here.

• Why it matters: Since independent mortgage banks (IMBs) were first mentioned by FSOC as a risk area in 2015, MBA, the Conference of State Bank Supervisors, FHFA, and Ginnie Mae have worked collaboratively to strengthen IMB capital, liquidity, and net worth standards. Pending proposals from those bodies would substantially address the concerns raised by FSOC. Indeed, the 2021 FSOC report “commends steps taken by [Ginnie Mae and CSBS] to better understand options” for enhanced IMB standards.”
• What’s next: MBA will continue to ensure that “prudential” standards for IMBs are properly calibrated and do not impair the crucial role they play in serving the single-family mortgage market.

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

HUD Secretary Fudge Testifies Before Congress to Discuss FY 2023 Budget Submission

On Wednesday and Thursday, HUD Secretary Marcia Fudge appeared before the House and Senate Transportation-HUD (T-HUD) Appropriations subcommittees to discuss the department’s fiscal year 2023 budget request. Members in attendance commended Fudge’s willingness to work with them.

• Why it matters: Fudge and elected officials discussed HUD’s personnel gap, emergency rental assistance, and technology and credit availability at the Federal Housing Administration. Members and senators also asked about various solutions to the affordable housing crisis and the use of Community Development Block Grant grants. A more detailed summary of this week’s House hearing can be found here.
• What’s next: Congress will begin drafting its FY 2023 funding bill prior to the end of the fiscal year on September 30, 2022. With Congress unlikely to reach agreement to move all 12 appropriations bills before September 30, legislators will have to pass a stop-gap continuing resolution to keep the government operating beyond October 1.

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

Congress Introduces VA Appraisal Modernization Legislation 

On Thursday, House Committee on Veterans’ Affairs Ranking Member Mike Bost (R-IL) and Senator Dan Sullivan (R-AK) introduced the bicameral Improving Access to the VA Home Loan Act. The legislation would require the Department of Veterans Affairs to revisit existing rules and regulations governing VA home appraisals. Specifically, the bill requires the VA to review appraisal certification requirements, encourage hybrid appraisals and benefit from emerging technologies, and to revisit policies on property inspection waivers, minimum property requirements, and comparable sales. A link to a press release, which includes a copy of the text and a statement from MBA SVP of Legislative and Political Affairs Bill Killmer, can be found here.

• Why it matters: Modernizing VA appraisals has the potential to make the program easier, cheaper, and faster to use for our nation’s service members.     
• What’s next: 2022 MBA Vice-Chairman Mark Jones, Chief Executive Officer and Co-Founder of Amerifirst Home Mortgage, is testifying before a subcommittee of the full House Veterans’ Affairs Committee on Wednesday, May 18, in support of the Bost bill (H.R. 7735). 

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

CFPB Releases ECOA Advisory Opinion 

On Monday, CFPB released an Advisory Opinion explaining that the Equal Credit Opportunity Act and its implementing rule, Regulation B, protect applicants both during the process of requesting credit and once credit has been extended. In effect, the Advisory Opinion extends ECOA, traditionally seen as focusing on originations and applying only to persons actively seeking credit, to the loan servicing context.

• Why it matters: The Advisory Opinion establishes that ECOA’s anti-discrimination mandate protects borrowers after they have applied for and received credit. “For example, ECOA prohibits lenders from lowering the credit limit of certain borrowers’ accounts or subjecting certain borrowers to more aggressive collections practices on a prohibited basis, such as race.” The Advisory Opinion also makes clear that lenders must provide adverse action notices to existing account holders. For example, the Bureau suggests such notices would be required for a revocation of credit or an unfavorable change in the terms of a credit arrangement.
• What’s next: By issuing the interpretation as an Advisory Opinion, the CFPB argued that the policy is an “interpretive rule … exempt from the notice-and-comment rulemaking requirements of the Administrative Procedure Act.” Consequently, the rule will become effective immediately upon its publication in the Federal Register. MBA will continue to seek clarification on expectations with respect to fair lending and fair servicing.  

For more information, please contact Justin Wiseman at (202) 557-2854 or Blake Chavis at (202) 557-2930.

FHFA Mandates New Form with Language Preference Question 

Recently, FHFA announced that lenders selling loans to Fannie Mae or Freddie Mac must present borrowers with the Supplemental Consumer Information Form as part of the application process. The SCIF asks applicants to identify their language preference and collects information on any homebuyer education or housing counseling the borrower has received. Currently, the SCIF is an optional form. Mandatory use of the SCIF goes into effect for applications received on or after March 1, 2023.

An updated version of the SCIF is available on Fannie Mae’s website (here) and, according to FHFA, will be available on its Mortgage Translations website later this summer.

• Why it matters: FHFA originally planned to include the language preference question in the redesigned Uniform Residential Loan Application (URLA). At that time, MBA argued that asking applicants for their preferred language creates an expectation that the lender can accommodate non-English languages even if it cannot (due to gaps in legal guidance and translated document availability that create operational challenges and potential compliance risk). The SCIF language preference question causes similar concerns, namely that lenders may not be able to meet consumers’ language preference expectations. In addition to concerns related to the language preference question, MBA outreach to member companies has identified aspects of the SCIF’s homebuyer education or housing counseling questions that are unclear, including whether a lender or borrower responds to certain questions.
• What’s next: MBA will engage FHFA to seek clarity on SCIF uncertainties and will request a longer time frame for implementation. Further, MBA will continue to urge regulators, particularly the CFPB, to address gaps in translations and legal guidance.  

For more information, please contact Justin Wiseman at (202) 557-2854 or Blake Chavis at (202) 557-2930.

MBA Reiterates Concerns with Proposed FINRA Margin Requirements

On Tuesday, MBA submitted comments to the Securities and Exchange Commission regarding the margin requirements associated with Financial Industry Regulatory Authority Rule 4210. These proposed requirements, which have been in various stages of development and implementation for nearly a decade, would require broker-dealers to collect margin associated with the trading of agency mortgage-backed securities on a forward-settling basis. MBA reiterated its longstanding concerns with this proposal, which has the potential to adversely impact market liquidity, hedging practices, and consumer costs.

• Why it matters: This rule would require mortgage lenders in many cases to post margin if they utilize To-Be-Announced (TBA) securities and other forward-settling MBS transactions to hedge the interest rate exposures of their loan pipelines. MBA’s comments highlighted that mortgage lenders are end users of these securities and use them for hedging rather than speculative purposes. MBA further noted that the imposition of mandatory margin requirements likely would have exacerbated the liquidity issues that arose in March 2020 at the onset of the pandemic.
• What’s next: The SEC commissioners will consider the comments submitted by stakeholders and determine whether FINRA Rule 4210 will be implemented as proposed or be subject to continued refinement by FINRA.

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

Federal Agencies Issue Revise Interagency Flood Insurance Q&As 

On Wednesday, the Office of the Comptroller of the Currency, Federal Reserve, Federal Deposit Insurance Corp., National Credit Union Administration and Farm Credit Administration issued revised joint interagency Q&As on flood insurance. These Q&As replace those originally published by the agencies in 2009 and 2011, and consolidate Q&As proposed by the agencies in 2020 and 2021. As a result, the new Q&As cover both federal flood insurance rules and those on private flood insurance acceptance. MBA led industry comments in response to both proposals.

• Why it matters: The Q&As are intended to clarify the application of flood insurance rules across the full range of scenarios in which lenders must apply them for both lenders and regulatory examiners.
• What’s next: MBA and members of MBA’s flood insurance working group will review the final Q&As and assess the extent to which they address concerns.

For more information, please contact Bruce Oliver at (202) 557-2840 (Commercial/Multifamily) or Sara Singhas (Single-Family) at (202) 557-2826.

MBA Submits Letter Detailing Origination-Focused FHA Handbook Recommendation

Last Friday, MBA submitted a letter to FHA leadership detailing its origination-focused Single Family Housing Policy Handbook suggested amendments. This letter is a follow-up to previous recommendations sent in December 2021. Through rigorous feedback from MBA members, the letter highlights MBA’s Top 4 FHA Handbook origination concerns.

• Why it matters: The FHA Single-Family Housing Policy Handbook provides guidance to lenders in the execution of FHA-insured mortgages – a crucial program for low- to moderate-income households, first-time homebuyers, and historically underserved borrowers nationwide. 
• What’s next: MBA will continue to work with FHA leadership and advocate for these and other improvements to its mortgage insurance program.

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

REGISTER: MBA Single-Family Research Showcase: June 22-23, 2022

On June 22-23, join MBA’s Research and Economics team for its annual, two-day online MBA Single-Family Research and Economics Showcase. Led by MBA SVP and Chief Economist Mike Fratantoni, analysts will detail the most current results and insights from their residential surveys, forecasts, and reports.

• Why it matters: Session topics include: A Keynote on the Economy and the Mortgage Market; Latest Performance Benchmarking Data for Production and Servicing; Industry Volume and Demand; Demographics, Market Profiles and Players; Forbearance and Delinquency; Technology and Innovation; Staffing Issues; and Views on the Future of the Mortgage Industry, as well as a Q&A with MBA’s analysts.
• What’s next: Register to attend. CPE credit is available. 

For more information, please contact Marina Walsh at (202) 557-2817 or Jenny Masoud at (202) 557-2879.

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:

• Introduction to Commercial Mortgage-Backed Securities – May 19
• New Fannie Mae and Freddie Mac Condominium and Cooperative Guideline Changes – May 24
• What Trends will Shape the Lending Space in the Second Half of 2022 – June 2
• CFPB, UDAAP and the Focus on Junk Fees – June 9
• Serving Loan Applicants with Limited English Proficiency – June 14
• Leveling Up Your Social Media Strategy with Paid Advertising – June 28

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.