MBA Advocacy Update Oct. 24 2022

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

On Friday, Ginnie Mae extended the mandatory implementation date of its recently announced risk-based capital requirement to December 31, 2024. On Wednesday, a federal appeals court found that the CFPB’s independent funding structure is unconstitutional; because the case involved the CFPB’s payday lending rule, there are no immediate or short-term impacts to any mortgage rules from this decision. On Monday, the VA published an Advanced Notice of Proposed Rulemaking requesting feedback on expanding its incentivized loss mitigation options when assisting borrowers facing hardships.  

Ginnie Mae Extends Implementation Deadline for Risk-Based Capital Requirement

On Friday, Ginnie Mae extended the mandatory implementation date of its recently announced Risk-Based Capital (RBC) requirement to December 31, 2024. Ginnie Mae has been engaged with industry stakeholders on this issue and stated that the delayed compliance date is a result of stakeholder feedback and current market conditions. Importantly, all other aspects of the revised Ginnie Mae Eligibility Requirements announced in August will go into effect as planned. MBA has led efforts to address concerns about the RBC portion of the standards, engaging with Ginnie Mae in a thoughtful, data-informed discussion about the possible adverse impact on the Ginnie Mae mortgage servicing rights market, and the implications for first-time, low- and moderate-income, and veteran homebuyers. In a press statement Friday, MBA President and CEO Bob Broeksmit, CMB, said MBA “appreciates the dialogue with Ginnie Mae and will continue our work to ensure that the mortgage system remains safe without causing undue harm or higher costs to borrowers.” 

Ginnie Mae President Alanna McCargo also noted that as issuers and servicers adapt to changing market conditions, Ginnie Mae will focus on working with counterparties to manage risks and ensure continuity in serving the most underserved households through all economic cycles.

• Why it matters: Since its release in August, MBA has highlighted several concerns with the RBC requirement in conversations with Ginnie Mae. While the delayed implementation date allows more time for compliance, it does not remedy concerns regarding the punitive treatment of MSRs, which could reduce risk-adjusted returns and contribute to a potential retreat of IMBs from Ginnie Mae servicing while increasing borrower costs and reducing access for FHA/VA/USDA borrowers. 
• What’s next: MBA will continue ongoing discussions with Ginnie Mae to advocate for refinements to the RBC requirement to ensure they do not disrupt the MSR market and destabilize the IMB sector. With the additional time, MBA will also work with Ginnie Mae to re-double efforts on a number of ongoing reform efforts that could improve the attractiveness of the Ginnie Mae program.  

For more information, please contact Pete Mills at (202) 557-2878 orSasha Hewlett at (202) 557-2805.

Fifth Circuit Court Rules CFPB Funding Structure Unconstitutional 

In an opinion issued Wednesday, a three-judge panel of the Fifth Circuit Court of Appeals invalidated the Consumer Financial Protection Bureau’s Payday Lending Rule, reasoning that the Bureau’s independent funding structure is unconstitutional under the Constitution’s Appropriations Clause and general separation of powers principles.  

• Why it matters: This ruling is currently limited to the CFPB’s Payday Lending Rule. There are no immediate or short-term impacts to any mortgage rules from this decision, but the logic of the decision raises interesting questions about Bureau rules and operations going forward. MBA is currently evaluating the potential impact on existing Bureau regulations.
• What’s next: The CFPB is expected to appeal this decision, which could result in a lengthy process. MBA will continue to monitor legal and market implications and inform members of any new developments as they arise. 

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

VA Publishes Loss Mitigation ANPR

On Monday, the Department of Veterans Affairs published an Advanced Notice of Proposed Rulemaking requesting feedback on expanding its incentivized loss mitigation options when assisting borrowers facing hardships. Specifically, the VA is considering whether the loan deferment, the Veterans Assistance Partial Claim Program (VAPCP), and the COVID-19 Refund Modification should become permanent features in its loss mitigation toolkit. 

• Why it matters: The ANPR offers MBA the opportunity to provide recommendations to the VA on modernizing its loss mitigation options ahead of any proposed final rule. 
• What’s next: Comments are due January 17, 2023. MBA will be holding calls with members through the Loan Administration Committee’s Loss Mitigation working group. The kickoff call is Friday, November 4, at 11:00 a.m. ET. 

For more information, please contact Brendan Kelleher at (202) 557-2770.

HUD Publishes Proposed Rule on Transitioning from LIBOR to Alternative Indices

On Wednesday, HUD published a proposed rule on transitioning adjustable-rate mortgage products from London Interbank Offered Rate to alternative reference rates. The rule proposes to transition existing FHA-insured forward and Home Equity Conversion Mortgage ARMs from LIBOR to the Secured Overnight Financing Rate (SOFR) after the cessation of LIBOR on June 30, 2023. The rule also proposes to remove LIBOR – and add SOFR – as an approved index for newly originated forward ARMs and HECM ARMs, a change which was previously made for HECM ARMs last year through Mortgagee Letter 2021-08. For HECM monthly ARMs, the proposed rule makes clarifying regulatory changes and establishes a lifetime 5 percent interest rate cap.

• Why it matters: This proposed rule is the result of an ANPR HUD published last year seeking public input on the transition away from LIBOR. MBA and its coalition partners previously submitted comments and advocated for clear guidance for industry participants to promote compliance certainty and equitable outcomes during the LIBOR transition.
• What’s next: HUD will be accepting public comments on the proposed rule through November 18. MBA will further analyze this proposed rule in the coming weeks and will continue to engage with HUD on this important issue. 

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

State Regulators Encourage Licensees to Prepare for the NMLS Renewal Period

On Thursday, the Conference of State Bank Supervisors issued a press releaseencouraging state licensees to begin taking steps to prepare for the Nationwide State Licensing System license renewal period. In the release, CSBS and state regulators urge licensees to update their NMLS record to ensure accuracy, reset NMLS passwords to meet the new March requirements, verify that a current email address is provided to receive system updates, be aware of any new state-specific renewal requirements, and to complete available training to be familiar with the renewal process. The NMLS renewal period for state licenses will begin November 1, and ends at midnight ET on December 31.

• Why it matters: MBA members are encouraged to review and complete company and mortgage loan originator license renewals when the window opens to avoid interruptions to business operations.
• What’s next: MBA is ready to engage with CSBS to address any NMLS system issues related to the renewal period.

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

California Privacy Rights Act Update

The California Privacy Protection Agency released an updated version of their proposed regulations implementing the California Privacy Rights Act. MBA and California MBA previously submitted a letter to the CPPA on August 23, to voice member concerns. While much of the regulation remains the same, the CPPA did make changes to the dark pattern prohibition, the “disproportionate effort” defense to consumer requests, and the “average consumer” standards, all of which were highlighted as areas of concern in the joint MBA and CMBA comment letter. 

• Why it matters: California is a leading state in developing data privacy law. In addition to creating obligations in the California market, any regulation created by the CPRA could be used as a blueprint for future rulemaking in other states or at the federal level.
• What’s next: MBA will keep members informed of any changes to the CPRA. 

For more information, please contact Kobie Pruitt at (202) 557-2870 and Gabriel Acosta at (202) 557-2811.

Appraisals for Higher-Priced Mortgage Loans Exemption Threshold 

The Office of the Comptroller of the Currency, the Federal Reserve Board and the CFPB announced the 2023 threshold for exempting loans from special appraisal requirements for higher-priced mortgage loans will increase from $28,500 to $31,000. The threshold amount will be effective January 1, 2023, and is based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) as of June 1.

• Why it matters: The Dodd-Frank Act) added special appraisal requirements for higher-priced mortgage loans, including that creditors obtain a written appraisal based on a physical visit to the interior of the home before making a higher-priced mortgage loan. The rules implementing these requirements contain an exemption for loans of $25,000 or less, adjusted annually to reflect CPI-W increases. Annual threshold adjustments for prior years can be accessed here.
• What’s next: The final rule ws scheduled to be published in the Federal Register on October 20. 

For more information, please contact Justin Wiseman at (202) 557-2854. and Gabriel Acosta at (202) 557-2811.

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:

• Climate Risk in CREF – What we Know and are Learning – November 1
• Augmenting Talent with Technology – November 8
• TRID Housekeeping & Latest Information – November 15
• Inflation, Interest Rate, Cap Rates & Values: What Do We Really Know? – November 30
• Ensuring HMDA Data Integrity and Common Reporting Issues – December 14
• Ten Things Your Company Must Do in 2023 – January 18

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.