MBA Advocacy Update Nov. 21, 2022

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

With just a few races left to be finalized, Republicans secured a narrow House majority in the coming Congress earlier this week. And regardless of the December 6 Georgia runoff outcome, Democrats have retained their Senate majority. Leaders and key committee chairs in both chambers will be determined in the coming weeks. 

MBA Again Calls for FHA MIP Cut After HUD Reports MMI Fund Capital Ratio at 11.11%

​On Tuesday, HUD published its Annual Report to Congress on the financial status of the Federal Housing Administration Mutual Mortgage Insurance Fund. The report announced a strong combined capital ratio of 11.11% – well above the statutory minimum of 2.0%. The report also outlined that a stress test conducted on the MMI Fund that models economic conditions identical to the Great Recession resulted in a capital ratio of 6.31% – still more than three times the statutory minimum reserve ratio – signaling the MMI Fund’s ability to withstand significant economic headwinds. In an MBA press statement, MBA President and CEO Bob Broeksmit, CMB, stressed that an MIP cut would help offset the impact of higher mortgage rates and improve the purchasing power for many prospective homebuyers.

• Why it matters: A healthy FHA program is necessary to ensure the broad availability of sustainable mortgage credit to low- and moderate-income households, minority borrowers, first-time homebuyers, and other historically underserved communities. The strength of this year’s annual assessment of the health of the MMI Fund should spur consideration of changes to the level and structure of FHA mortgage insurance premiums. On a conference call with industry groups, FHA indicated that it is evaluating changes to the MIP structure with a view to maximize payment relief for borrowers. A comprehensive MBA summary and a presentation with key charts can be found here and here. 
• What’s next: Given FHA’s healthy financial position, MBA continues to believe that HUD should make FHA loans more affordable by reducing mortgage insurance premiums as soon as budgetary opportunities allow. 

For more information, please contact Hanna Pitz at (202) 557-2796.

Broeksmit Participates in White House Follow-Up Meeting on Housing Supply and Affordability 

On Wednesday, MBA President and CEO Bob Broeksmit, CMB, joined a small group of industry and affordable housing leaders for a constructive meeting with National Economic Council Director Brian Deese, HUD Secretary Marcia Fudge, Federal Housing Finance Agency Director Sandra Thompson, Domestic Policy Council Director Susan Rice and other key staff members. The meeting was a follow-up to an initial gathering in September to discuss legislative, administrative, private sector and state and local solutions to address housing supply and affordability challenges across the country.

• Why it matters: Remarks from Broeksmit and others in the group focused on, but were not limited to, several topline issues, including the potential timing of a reduction to FHA mortgage insurance premiums; the ongoing assessment of Ginnie Mae’s recently finalized risk-based capital and liquidity requirements; FHFA’s announcement at MBA Annual on loan-level price adjustments, credit scoring, and appraisal data; FHA multifamily loan limit and statutory loan changes; and potential legislative fixes during the current “lame duck” session in Congress, including enhancements to the Low-Income Housing Tax Credit (LIHTC). On the topic of tenant rights groups recently advocating for the White House to impose rent control on GSE multifamily loans, Broeksmit stressed that such a move would reduce the supply and overall health of rental housing by discouraging borrowers from seeking GSE-backed financing, which is currently roughly 40% of the market. 
• What’s next: MBA is committed to working with the Biden administration, Congress, and industry stakeholders on safe and responsible policies that increase homeownership and affordable rental housing options for all households.

For more information, please contact Bill Killmer at (202) 557-2736, Pete Mills at (202) 557-2878, and Mike Flood at (202) 557-2745.

MBA, Broad Coalition Urges Action on MI Premium Deductibility  

Last week, MBA joined a broad coalition of real estate and lending groups urging Congress to act on bipartisan, bicameral legislation to make mortgage insurance premium deductibility a permanent part of the federal tax code. The legislation, known as the Middle Class Mortgage Insurance Premium Act of 2022 (H.R. 6109/S. 3590), would also raise the provision’s Adjusted Gross Income (AGI) eligibility phaseout cap for the first time since 2007. A copy of the coalition’s letter of support to House and Senate leaders can be found here.

• Why it matters: The coalition groups, including MBA, have long supported the MI premium tax deduction as a means to support homeownership for low- and moderate-income households, but two aspects of the current tax code have hampered its effectiveness: (1) its temporary nature; and (2) its relatively low AGI phaseout and status as the only itemized deduction subject to an AGI cap and/or phaseout.
• What’s next: Congress may consider tax “extenders” legislation during its current “lame duck” session. MBA will continue to advocate for housing affordability-related priorities, including the MI premium deduction proposal, to be incorporated in any tax legislation considered by the House and Senate prior to year’s end.  

For more information, please contact Bill Killmer at (202) 557-2736.

CFPB Appeals Fifth Circuit Ruling to Supreme Court 

On Tuesday, the Consumer Financial Protection Bureau appealed the Fifth Circuit Court of Appeals decision in CFSA v. CFPB – in connection to its Payday Lending Rule – to the Supreme Court to resolve questions over the constitutionality of the Bureau’s funding mechanism. The Bureau has requested that the Court hear the case before the end of the current term, which will end in late June or early July of 2023. If the Court does take the case this term, a final decision would likely be released at the end of the term. 

• Why it matters: This case has potential to significantly impact the regulatory landscape of the mortgage industry. In one of the reasons why the Court should grant the petition, the Bureau cites MBA’s Amicus Brief in Selia Law to point out the effect this case could have and the resulting disruption in the mortgage industry. A decision upholding the 5th Circuit ruling could create significant regulatory uncertainty for the financial services industry.
• What’s next: MBA will be working with other industry trades to develop proposed options that would mitigate potential disruptions and will keep members informed on any updates. 

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

FHFA: G-Fees Increased 2 BPS in 2021   

FHFA this week issued its annual report on single-family guarantee fees charged by Fannie Mae and Freddie Mac in 2021. The report provides an analysis broken out by product type, risk class, and lender delivery volume and provides a four-year lookback. For all loan products, the average single-family g-fee increased by 2 basis points (bps) to 56 bps in 2021. The average g-fee in 2021 on 30-year fixed rate loans rose by 1 basis point to 59 bps, while the average g-fee on 15-year fixed rate loans rose by 6 bps to 42 bps, as borrowers of this product were more likely to refinance and were impacted by the adverse market refinance fee. The average g-fee by seller size was 56 bps for the medium and small seller groups, and 57 bps for the large seller group.  

• Why it matters: FHFA’s annual report provides a great perspective of the GSEs’ g-fees and is useful for identifying any significant trends or anomalies. The report also provides the data necessary to validate that FHFA and the GSEs have taken steps to ensure that g-fee discounts or other favorable treatments are not given to certain seller/servicers based on loan volume, size, or business model. 
• What’s next: MBA will continue to engage with FHFA on this important issue and will advocate to ensure g-fee parity. 

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

Senate Banking Committee, House Financial Services Committee Hold Hearings with Prudential Regulators

The Senate Banking Committee and House Financial Services Committee held oversight hearings on Tuesday and Wednesday, respectively, with the heads of the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the National Credit Union Administration and the Vice Chair of Supervision of the Federal Reserve System. A broad range of topics were discussed, including the Community Reinvestment Act, climate-related financial risk, and concerns from both sides of the aisle on digital assets and the recent collapse of digital asset exchange FTX.

• Why it matters: A host of regulatory concerns were also brought up during the hearing, including the risk of non-banks to the financial system, CRA reforms, and the CFPB’s petition to the Supreme Court to resolve questions over the constitutionality of its funding (CFSA v. CFPB). The mention of these topics could bring legislative proposals during the 118th Congress, as well as priorities that may be pursued by the respective regulatory agencies.  
• What’s next: MBA will continue working with key lawmakers and regulators on these issues and others impacting members. A more detailed hearing memo can be found here.

For more information, please contact Alden Knowlton at (202) 557-2741 or Ethan Saxon at (202) 557-2913.

CFPB Fall Supervisory Report Highlights Mortgage Origination and Servicing Issues 

On Wednesday, the CFPB released its fall Supervisory Highlights report on various legal violations identified during its supervisory examinations in the first half of 2022. The findings in the report cover a wide array of issues, such as inaccurate information in credit reporting, unacceptable loan officer compensation practices, improper “convenience” fees in mortgage servicing, unfair and deceptive practices in auto loans, and mishandling of COVID-19 relief. The mortgage origination and servicing supervisory observations can be found on pages 20-25.

• Why it matters: Of particular interest is the Bureau’s focus on the practice of charging convenience fees. Examiners found that mortgage servicers violated federal law by charging “sizable” phone payment fees and that consumers were not made aware of these pay-by-phone charges. The Bureau required the servicers to reimburse all borrowers who paid phone payment fees when those fees were not properly disclosed. The Bureau has been particularly focused on the practice of charging so called, “junk fees”. In June, a Bureau advisory opinion affirmed its view that federal consumer financial protection law often prohibits companies considered debt collectors under the Fair Debt Collection Practices Act from charging convenience fees to make a loan payment. MBA has contested this position in amicus briefs and the Bureau’s interpretation has not been fully adopted by courts reviewing the issue.
• What’s next: The Bureau periodically publishes these reports to share key examination findings and to communicate operational changes to its supervision program. MBA is sharing this report for informational purposes and will continue to inform members of relevant reports and findings as they arise.

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

NY DFS Releases Proposed Amendments to Cybersecurity Regulation 

Late last week, the New York State Department of Financial Services released proposed amendments to New York’s Cybersecurity Regulation (23 NYCRR 500). The proposed changes would establish a new tier of covered entity (“Class A Companies”) with additional reporting requirements, new requirements for cybersecurity governance on the Board of Directors or C-Suite level and reporting requirements for ransomware attacks. 

• Why it matters: The additional cybersecurity requirements on the Board and C-Suite level will require additional leadership involvement. A Chief Information Security Officer must be empowered to manage cybersecurity risks, and the Board must have sufficient expertise to provide oversite of cybersecurity risk management. 
• What’s next: MBA will continue to monitor this rulemaking and keep members aware of any changes. 

For more information, please contact Kobie Pruitt at (202) 557-2870 or Gabriel Acosta at (562) 413-2751.

D.C. Algorithm Bill Tabled; Likely to Be Reconsidered in 2023  

On Thursday, the District of Columbia city council sponsor of the Stop Discrimination by Algorithm Act (B24-0558) announced that a markup on the bill this year will not occur but will likely be reconsidered in 2023. This legislation would have placed significant restrictions on the use of algorithms in financial services decisions. Limiting the use of these algorithms would create incompatibility with the processes used to provide federally insured mortgages that are sold on the secondary market to the GSEs and insured by government agencies. Many of these products rely on automated processes, which financial institutions have no control over and thus no ability to audit or meet the bill’s transparency requirements.

• Why it matters: B24-0558 includes standards that are inconsistent with existing laws governing financial services companies, which could affect access to numerous federal programs for D.C. residents that are aimed at increasing credit affordability, with the greatest impact on those consumers with lower credit scores or income who rely on those programs.
• What’s next: While the bill is unlikely to be brought up again this year, it is expected to be reintroduced in 2023. MBA will continue to work with state and local partners to improve future versions. 

For more information, please contact Kobie Pruitt at (202) 557-2870 or Gabriel Acosta at (562) 413-2751.

mPower Moments: On the Importance of Advocating for Others with Abby Wambach 

In this mPower Moments episode, mPower Founder Marcia M. Davies sits down with Abby Wambach, soccer legend, activist for equality and inclusion, and New York Times best-selling author. During this chat, Wambach discusses the inequalities she faced during her tenure on the U.S. Women’s National Soccer team and how those experiences have shaped her drive to close the inequality gap faced by women athletes. 

• Why it matters: Wambach emphasizes the importance of speaking up and advocating for others who may not have the same opportunities or privileges you possess – and how advocating for others can bridge the inequality gap. Furthermore, Wambach shares great advice on how to embrace each other’s wins and how to use that as fuel to build on our own successes.
• What’s next: To watch more mPower Moments, click here. 

For more information, please contact Marcia Davies at (202) 557-2707.

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:

• Inflation, Interest Rate, Cap Rates & Values: What Do We Really Know? – November 30
• MAA Post-Election Update: November 2022 – December 7
• Ensuring HMDA Data Integrity and Common Reporting Issues – December 14
• Ten Things Your Company Must Do in 2023 – January 18
• Mortgage Accounting Webinar Series: Part I: Drilling into Mortgage Accounting – May 3

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.