MBA Advocacy Update: VA Issues Voluntary Foreclosure Moratorium; SEC Conflicts of Interest Final Rule; FHA 203(k) Program Proposal

VA Formally Announces Voluntary Foreclosure Moratorium

The Department of Veterans Affairs (VA) released formal guidance announcing a voluntary foreclosure moratorium through May 31, 2024. Effective immediately, the VA’s Circular titled “Loan Repayment Relief for Borrowers” follows last week’s press statement that initially called on mortgage servicers to pause foreclosure sales for six months.

Why it matters: The purpose of the moratorium is to protect delinquent Veteran borrowers who no longer have access to a VA standalone partial claim option – which VA allowed to lapse in October 2022 – while VA continues to develop the long-delayed Veterans Assistance Purchase Program (VASP), an alternative below-market interest rate modification program. The absence of formal policy from the VA has left servicers in limbo without clear guidance on how to comply with the moratorium.

The bottom line: The VA’s announcement does not address reimbursement of the additional costs that servicers will incur during the moratorium. In previous engagements with the VA team, MBA highlighted the advancing obligations for Ginnie Mae issuers and the liquidity risk for servicers without proper (and expedited) reimbursement of those costs because of a voluntary moratorium.

What they’re saying: in a press statement, MBA President and CEO Bob Broeksmit, CMB, said, “Servicers provided relief to struggling borrowers during the pandemic by advancing payments owed on their mortgages and are willing to do so again. However, the VA needs to provide a detailed plan on how servicers will be reimbursed for advancing payments on behalf of borrowers.”

Go deeper: VA’s Circular announced additional details, including:

Excluding vacant/abandoned properties from the moratorium;

Encouraging servicers to also avoid negative credit reporting; and

Foreshadowing additional loss mitigation announcements to come, including the VASP program that “will not be available until March 2024.” The VA’s press release previously noted VA’s intention to extend the Refund Modification also through May 2024.

What’s next: MBA will communicate developments through the Loan Administration Committee.

For more information, please contact Brendan Kelleher at (202) 557-2700.

SEC Issues Final Conflicts of Interest Rule

Last week, the Securities and Exchange Commission (SEC) published its Final Rule to Prohibit Conflicts of Interest in Certain Securitizations. The final rule implements Section 27B the Securities Act and is intended to prevent the sale of asset-backed securities that are tainted by material conflicts of interest.

Why it matters: In previously submitted comments, MBA’s recommendations included ensuring that Mortgage Insurance-linked Notes (MILNs) and Credit Risk Transfer (CRT) transactions are not considered conflicted transactions, that MILNs are not considered synthetic asset-backed securities under the rule, and that servicers, special servicers, and B piece buyers are not considered “sponsors.”

The final rule ensures that MILNs are in no way impacted and also includes modifications to ensure that the regular use of CRT transactions, and more specifically those executed by the GSEs, are not negatively impacted.

Go deeper: While the need to prevent transactions that present material conflicts of interest between certain securitization participants and investors is understandable, it was important that the final rule did not impact normal transactions that support the efficiency and efficacy of our securitization market. MBA appreciates that the final rule made considerations for both MILNs and CRT transactions.

What’s next: The final rule will be effective 60 days after publications to the Federal Register. MBA will remain engaged with the SEC on critical issues impacting the housing finance system.

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

HUD Proposes Improvements to FHA 203(k) Renovation Programs
Last Wednesday, the Federal Housing Administration (FHA) posted a draft Mortgagee Letter (ML) on its Single-Family Drafting Table that proposes several updates to its 203(k) renovation programs and invites feedback from stakeholders.

Go deeper: Among the proposed changes is an increase in the cap on total rehabilitation costs from $35,000 to $50,000 (and $75,000 in high-cost areas) for the Limited 203(k) program, updating the 203(k) Consultant fee schedule, and increasing the allowable timeframes for project completion for both the Standard and Limited programs.

The draft ML is directionally responsive to several MBA recommendations and follows HUD’s Request for Information (RFI) that MBA responded to earlier this year.

Why it matters: Unlocking the FHA 203(k) renovation program is a key MBA priority, given its potential to address housing supply shortages by facilitating the rehabilitation of outdated and/or dilapidated housing stock that would otherwise lack marketability. MBA is pleased that many of the proposed enhancements are consistent with the items MBA recommended in its letter to FHA back in April.

What’s next: MBA will continue to engage with FHA on improvements to the 203(k) programs and will provide recommendations by the January 5, 2024 deadline.

For more information, please contact Darnell Peterson at (202) 557-2933.

MBA Supports FHA Proposed Changes to HECM for Purchase Program

MBA recently submitted comments in response to the FHA’s proposal to expand the list of acceptable funding sources, including premium pricing, to satisfy a Home Equity Conversion Mortgage (HECM) borrower’s monetary investment requirement.

MBA applauds FHA’s proposal to expand additional funding sources available for borrowers to meet their monetary investment requirement to qualify for an HECM-for-Purchase loan.

Why it matters: Increasing the number of viable and sustainable strategies for financing a home purchase is crucial for economic growth and the many older Americans seeking to leverage their home equity in retirement. The provisions outlined in the proposal address this issue by creating closer alignment between the HECM for Purchase program and traditional forward mortgages with respect to interested party contributions.

What’s next: MBA will work with FHA to identify and advance policies to support its HECM program.

For more information, please contact John McMullen at (202) 557-2706.

FHFA Announces Conforming Loan Limits for 2024

Last Tuesday, the Federal Housing Finance Agency (FHFA) published the 2024 maximum conforming loan limits for mortgages eligible to be acquired by Fannie Mae and Freddie Mac (the GSEs). The limits are calculated by FHFA according to a formula established by Congress in the Housing and Economic Recovery Act of 2008 (HERA).

Why it matters: The increases reflect slower home-price appreciation in 2023 compared to 2022. The baseline maximum conforming loan limit for one-unit properties will increase 5.56 percent from $726,200 to $766,550. The maximum conforming loan limit for one-unit properties in high-cost areas will increase to $1,149,825– or 150 percent of the baseline limit, which is the “ceiling” set by Congress for high-cost area loan limits.

What’s next: MBA will continue to engage with FHFA and the GSEs on this and other critically important housing policy issues.

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

CFPB Director Chopra Testifies Before Congress

Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra recently appeared before both the House Financial Services and Senate Banking committees for his Semi-Annual Report to the Congress. Per custom, he fielded questions from lawmakers on policy initiatives undertaken by the Bureau. A summary of both hearings can be found here and here.

Why it matters: Director Chopra was asked about Section 1071 rulemaking concerns, the precipitous decline in mortgage lending, housing affordability, and ways to facilitate more refinance activity when interest rates decline.

Go deeper: Director Chopra also discussed streamlining rules and procedures for servicers with loan modifications and helping borrowers find alternatives to foreclosure. He also discussed the potential for the Bureau to increase its use of supervisory resources focused on nonbanks because of the significant role those institutions continue to play in the delivery of financial services.

Lawmakers’ questions also focused on CFPB governance and operations, overdraft fees, credit reporting, PACE lending markets, protecting Veterans and servicemembers, the use of AI in lending decisions and the accuracy of explanations provided for credit denial actions, and, importantly, what the CFPB is doing to protect consumers from misinformation via the use of mortgage credit trigger leads.

What’s next: MBA will continue to advocate on relevant real estate finance issues with CFPB and Congress. On October 3, the Supreme Court heard oral arguments regarding the constitutionality of the Bureau’s funding structure in the case of Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited.

A decision is expected by early next summer.

For more information, please contact Rachel Kelley at (202) 557-2816, Ethan Saxon at (202) 557-2913, George Rogers at (202) 557-2797, or Bill Killmer at (202) 557-2736.

Upcoming MBA Education Webinars on Critical Industry Issues
MBA Education continues to deliver timely single-family and commercial/multifamily programming that covers the spectrum of challenges, obstacles and solutions pertaining to our industry. Below, please see a list of upcoming and recent webinars – which are complimentary to MBA members:

Community Reinvestment Act: Final Regulations and What Banks Need to Know Now – November 28

Originating and Succeeding with High-Net-Worth Borrowers – November 29

Ten Things Your Company Must Do in 2024 – December 12

California’s Corporate Climate Data Accountability Act – December 14

MBA members can register for any of the above events and view recent webinar recordings by clicking here.

For more information, please contact David Upbin or (202) 557-2931.