MBA Advocacy Update May 9 2022

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

Last Thursday, the OCC, Federal Reserve, and FDIC issued a joint notice of proposed rulemaking overhauling Community Reinvestment Act regulations. And HUD announced an exclusive listing period for CWCOT Post-Foreclosure Sales.

Join the 250+ 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.    

Banking Agencies Propose Joint CRA Overhaul

On Thursday, the Office of the Comptroller of the Currency, Federal Reserve, and Federal Deposit Insurance Corp. jointly released a notice of proposed rulemaking on the modernization of the framework governing the Community Reinvestment Act regulations.

The proposal is the first major overhaul of CRA since 1995 and seeks to address the structural and technology-driven changes to banking over the past 25 years. The proposal also attempts to make CRA evaluations more objective, transparent, and predictable by clarifying and expanding the scope of CRA-qualifying activities and assessment areas. During the FDIC Board vote on the proposal, Consumer Financial Protection Bureau Director Rohit Chopra – who also sits on the FDIC Board – suggested that policymakers (i.e., Congress) should consider whether the CRA should apply to nonbank mortgage lenders because “the public subsidizes [their] mortgage lending” through their large role in government and GSE lending. 

• What they’re saying: MBA opposes extending CRA to independent mortgage bankers (IMBs) because they do not accept deposits or receive any other direct federal benefits. While CRA expansion to IMBs was not included in the proposal (that would require congressional action), MBA President and CEO Bob Broeksmit, CMB, stressed MBA’s opposition during an interview this week in The Wall Street Journal, saying, “The Community Reinvestment Act for independent mortgage bankers is nonsensical and a solution in search of a problem.”
• Why it matters: The proposal would realign the rules from the three banking agencies, following the OCC’s attempt at a go-it-alone revision under the Trump administration. The NPR moves away from branch/facility-based assessment areas and would provide CRA credit for banks’ “retail lending assessment areas” – areas where an institution has a concentration of more 100 mortgage loans or 250 small-business loans. Also, the agencies propose to provide CRA qualification for loans that support climate resiliency, and to expand CRA qualifying activities to certain rental housing programs guaranteed by the U.S. Department of Agriculture (USDA), special-purpose programs, as well as certain small-balance loans. 
• What’s next: MBA supports aligned CRA rules across the three agencies and will be reviewing the 600-plus-page proposal to ensure that mortgage banking and related activities that serve low- and moderate-income communities receive full credit under the rule. MBA will submit comments on the NPR by the requested due date of August 5.
• For more information, contact Fran Mordi at (202) 557-2860.

2. FHA Creates Exclusive Listing Period for CWCOT Post-Foreclosure Sales

On Thursday, the Federal Housing Administration announced an exclusive listing period for owner-occupant borrowers, HUD-approved nonprofits, or governmental entities to purchase properties sold through FHA’s Claims Without Conveyance of Title post-foreclosure sales. Thursday’s announcement is in line with the administration’s goal and previous announcement to increase the supply of affordable housing.

• Why it matters: FHA’s CWCOT program allows servicers the opportunity to avoid conveyance of foreclosed properties back to HUD and reduce potential losses by selling foreclosed properties to third parties. Providing an exclusive listing period creates a greater awareness for owner-occupants, nonprofits, and governmental entities to participate in the program to help increase the supply of affordable housing. FHA is also extending the time frame to complete a post-foreclosure sale after the exclusive listing to provide as much time as possible to help servicers complete a third-party sale with all potential bidders.
• What’s next: MBA will continue to review the details of the mortgagee letter and identify any necessary clarifications. Potential feedback to FHA is due June 4.

For more information, contact Brendan Kelleher at (202) 557-2779.

CFPB Releases Spring Supervisory Highlights

The CFPB released its spring version of Supervisory Highlights last week. The Bureau publishes Supervisory Highlights quarterly to draw attention to trends it has observed through its examinations of regulated entities. This edition was light on mortgage-related content, but the Bureau did note: 

• Lenders were cited for offering higher loan officer compensation when a loan originator’s Fannie Mae originations passed a threshold for a total percentage of originations. The Bureau restated that a loan product is a bundle of the loan terms, and compensation based on terms is prohibited. 
• Lenders were cited for failing to retain appropriate documentation of customer requests that led to changes to the good faith estimates from the Loan Estimate. Changes based on changed circumstances are allowed, but the Bureau stated that documentation – beyond checking a box that the consumer asked for a change – must support the different charge. 
• The Bureau noted a software error where the fully indexed rate was rounded inappropriately and thus disclosed incorrectly.  

Why it matters: The Bureau publishes Supervisory Highlights to inform regulated entities of observations of improper conduct. There is an expectation that companies monitor this release and make changes to their compliance management framework as needed. 

What’s next: MBA continues to monitor this and other Bureau announcements.

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

Georgia Licensing Law Changes Mark Significant MBA Victory for MBA Advocacy

On Monday, Georgia Governor Brian Kemp signed legislation (SB 470) that would make important revisions to Georgia’s state licensing laws to create greater consistency with the federal SAFE Act and the laws of other states. SB 470 limits the scope of the state’s restrictions on nonbank lenders employing individuals with prior nonfinancial felony convictions to only “covered employees” who have access to residential mortgage loan origination, processing, or underwriting information on Georgia loans. With this change, a company’s Georgia license would no longer be threatened by the qualifications and backgrounds of staff who do not have access to the financial and personal identifiable information of consumers with Georgia loans. Prior to its passage, MBA wrote letters to members of the legislature urging them to support SB 470, issued multiple Mortgage Action Alliance (MAA) Calls to Action, and went with the MBA of Georgia to meet with staff of Governor Kemp and the Georgia Department of Banking Finance (DBF) to advocate for changes to the licensing law.

• Why it matters: The Georgia law was the most restrictive in the nation and created enormous legal uncertainty and compliance risk for MBA members, and threatened the careers of mortgage professionals working outside Georgia and in full compliance with the laws of other states. Changing the statute has been an MBA policy priority for many years and represents a major victory for industry advocacy and independent mortgage bankers operating in the state.
• What’s next: MBA will engage in outreach to the DBF to advocate for any regulations or regulatory guidance to be consistent with the legislative intent of SB 470.

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

Connecticut Legislature Sends Comprehensive Privacy Bill to Governor 

The Connecticut legislature passed legislation (SB 6) that will create a new data privacy framework in the state. If signed by Governor Ned Lamont, Connecticut would become the 5th state to enact a comprehensive consumer data privacy law.

• Why it matters: Connecticut would join Virginia, Colorado, and Utah as states that have included in their respective data privacy laws a full Gramm-Leach-Bliley Act (GLBA) exemption for financial institutions and data subject to the federal law. This would reflect a continued trend away from the standard set by the California Consumer Protection Act (CCPA), which provides an exemption only for financial GLBA-covered data, and not covered institutions.
• What’s next: MBA will also continue to work with state and local association partners to advocate for data privacy legislation that is consistent with the MBA Data Privacy Principles and includes a full GLBA exemption for financial institutions.

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

Federal Reserve Raises Short-Term Interest Rates Again; Announces Plans for Balance Sheet Reduction 

On Wednesday, the Federal Reserve – in a widely expected move – raised the benchmark federal funds rate at a range between 0.75% and 1.00% and indicated plans for more 50-basis-point rate hikes in upcoming meetings in a bid to curb sky-high inflation levels. The Fed also announced plans to reduce its $9 trillion balance sheet by allowing $60 billion in Treasuries and $35 billion in mortgage-backed securities (MBS) to passively roll off the balance sheet each month.

• According to Mike Fratantoni, MBA’s SVP and Chief Economist, “As clearly signaled in the March minutes, the FOMC [Federal Open Market Committee] will move to allow $60 billion in Treasuries and $35 billion in MBS to passively roll off the balance sheet each month, gradually reducing these asset holdings from extraordinary levels. The runoff will ramp up over the course of three months, which should allow markets to absorb this excess supply. Importantly, neither the statement nor the balance sheet plan repeated the goal of returning the balance sheet to all Treasuries, and there was no mention about the potential for active MBS sales. Musing about active sales has likely increased volatility in the MBS market recently, as investors do not know how to interpret the vague signals that had been given.”
• Added Fratantoni, “MBA is forecasting that mortgage rates are likely to plateau near current levels. The financial markets have attempted to price in the impact of Fed actions over this cycle, and they are likely also pricing in the economic slowdown that will result. Once we are past this rate spike and associated volatility, MBA expects that potential homebuyers may be more willing to re-enter the market. Given how much higher rates will remain above the past two years, we do not expect refinance demand to increase anytime soon.”

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

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

On June 22-23, 2022, 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, 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, contact David Upbin at (202) 557-2931.