MBA Advocacy Update Feb. 13, 2023

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

MBA Expresses Concerns Regarding New DTI-Based LLPA 

Last Friday, MBA sent a letter to the Federal Housing Finance Agency expressing concerns regarding recently announced changes to the GSEs’ loan-level price adjustments, particularly addition of an LLPA based on debt-to-income ratio. In the letter to Director Sandra Thompson, MBA reiterates initial concerns about the unfortunate timing of the new fees, coming at the peak of the spring homebuying season (May 1, 2023), which could undermine the housing market’s recovery amidst higher mortgage rates (see MBA President and CEO Bob Broeksmit’s, CMB, statement after FHFA’s initial announcement). The letter also highlights major issues raised by members that could result from the newly added LLPA tied to a DTI ratio. The new LLPA will likely mean multiple changes to a borrower’s pricing throughout the loan application process, which could cause operational and system issues, compliance implications related to TILA-RESPA Integrated Disclosures (TRID), compromised borrower trust, and challenges during post-closing quality control activities. 

• Why it matters: MBA believes the DTI-based LLPA is unworkable and should be removed. It is unclear if FHFA considered how often both monthly income and debt payments change during the loan process, and how complex it will be to provide an accurate rate to borrowers given this addition to the GSEs’ pricing framework. MBA believes there are alternative approaches available to the GSEs to mitigate their exposure to high DTI ratios that do not pose hardships to both lenders and borrowers. 
• What’s next: MBA will continue to advocate for the elimination of a DTI-based LLPA. MBA has requested a meeting with Director Thompson to further discuss this issue with a small group of lenders and practitioners to fully examine the difficulties of this implementation and identify alternative approaches.

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

CFPB Loses Key IMB Redlining Case 

Last Friday, a District Court in Chicago ruled in CFPB v. Townstone Financial Inc. and Barry Sturner that the Equal Credit Opportunity Act does not extend to prospective applicants under a plain language reading of the statute. The Court dismissed the CFPB’s complaint with prejudice, meaning the Bureau cannot bring the case against Townstone in the future. 

• Why it matters: This is a clear setback for the Bureau’s “redlining” theory used against independent mortgage banks, which relies on the discouragement of prospective applicants rather than demonstrating discrimination towards actual applicants. The judge ruled that “the ECOA unambiguously prohibits discrimination of ‘applicants,’ and not ‘prospective applicants,'” which it found was a complete bar to the Bureau’s chances of prevailing in this case. The Townstone case had been closely watched as one of the first to be litigated under the Bureau’s theory. It is expected that any future litigants would point to this opinion unless modified on appeal. 
• What’s next: The Bureau has the option to appeal to the 7th Circuit and then to the Supreme Court if they wish, and this opinion has no binding impact on other courts. MBA will monitor and provide any relevant updates on this important case.

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

House Financial Services Subcommittee Convenes Legislative Hearing on Federal Data Privacy 

On Wednesday, the House Financial Services Committee Subcommittee on Financial Institutions and Monetary Policy held a hearing, “Revamping and Revitalizing Banking in the 21st Century.” The panel focused on several bills, including a discussion draft of legislation that would reform the federal data privacy framework. Several members of the Subcommittee noted that including a private right of action into federal enforcement under the Gramm-Leach-Bliley-Act would have serious consequences on industries that collect and hold consumer data. A complete summary of the hearing can be found here.        

• Why it matters: The legislation included in the initial hearing for this Subcommittee telegraphs the set of issues that Republican members will likely prioritize.   
• What’s next: The full Financial Services Committee is expected to hold a markup at the end of the month that will likely include the data privacy legislation.

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

House Appropriations Committees Officially Organizes for the 118th Congress 

​Last week the House Appropriations Committee completed its organizational markup that adopted rules for the Committee and finalized the roster for the Full Committee and all Subcommittees. The roster for Republican and Democratic subcommittee assignments can be found here. 

• Why it matters: All the committees in Congress have finalized organizational meetings.  
• What’s next: House appropriators will begin working on the 12 separate Fiscal Year 2024 funding bills – including for HUD – in the coming weeks, with the target date of spring “markups” before advancing the legislation to the Senate.  

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

Senate Banking Committee Holds Housing Hearing 

​On Thursday, the Senate Banking Committee held a hearing, “The State of Housing 2023.” Witnesses were Christopher Herbert, Managing Director, Harvard Joint Center for Housing Studies; Robert Dietz, Chief Economist and Senior Vice President for Economics and Housing Policy, National Association of Home Builders; and Lance George, Director of Research and Information, Housing Assistance Council. A summary of the hearing can be found here. 

• Why it matters: Housing issues have the potential to be treated as a bipartisan priority of the committee this Congress. Senators raised a broad spectrum of concerns, including historic underproduction, housing tax credits, flood insurance, zoning reforms, rural lending, manufactured homes, and energy efficiency.    
• What’s next: MBA will work with members of the committee and other lawmakers as they develop and introduce housing-related legislation.  

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

MBA Submits Comment Responding to HUD ROV Draft ML

​Last week, MBA submitted comments to the HUD request for feedback on a draft Mortgagee Letter (ML) that proposes changes to the Federal Housing Administration’s appraisal reconsideration of value guidelines. The draft ML would expand HUD’s list of “material deficiencies” to include unlawful bias identified in the appraisal report and provides a path for borrowers to request an ROV. MBA urged HUD to define bias in its handbook and recommended HUD work with the other agencies in the PAVE Task Force to provide a standardized definition. MBA’s also highlighted numerous operational challenges and questions that must be addressed before the ML is incorporated into the FHA Single Family Housing Policy Handbook. MBA further emphasized both points in a joint letter with other lender trade groups and consumer advocacy groups.  

• Why it matters: The draft ML seeks to implement the recommendations of the PAVE Task Force report, which covered a wide range of areas, including oversight of the appraisal industry, reconsideration of value processes, barriers to entry for new appraisers, data collection and analysis, and consumer education. Lenders and borrowers should have clear standards for the ROV process that set appropriate expectations and minimize costs.  
• What’s next: MBA will continue to follow the progress of the draft ML and will provide relevant updates.  

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

MBA Responds to FHA’s Fall 2022 Default Servicing Priorities

​On Monday, MBA responded to FHA’s default servicing regulatory priorities that were updated earlier this year as part of the Office of Management and Budget’s Fall 2022 Unified Agenda and Regulatory Plan. The letter specifically encouraged HUD to finalize its proposal to increase the allowable modification term of up to 40 years, while supporting and recommending possible changes to potential proposed rules regarding the Single-Family Loan Sale, claims reforms, and modernization of FHA’s Face-to-Face requirement. MBA also recommended additional regulatory priorities for FHA and HUD to consider for future agendas.

• Why it matters: A key priority for MBA’s 2022-2023 Loan Administration Committee is to continue to re-enforce MBA’s longstanding commitment to reforming FHA’s servicing requirements. Modernizing FHA default servicing will help reduce costs, lower risks, and expand lender participation in the FHA program.
• What’s next: MBA will continue communicate regulatory priorities with HUD and FHA and provide relevant updates to members.

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

MBA, Industry Groups Request Meeting with Hochul Administration on Amendments to New York Foreclosure Law  

​Last week, MBA sent a letter requesting a meeting with Gov. Kathleen Hochul’s office and the New York Department of Financial Services to discuss urgently needed amendments to Chapter 821 of the Laws of 2022. The law abrogated the well-reasoned ruling of New York’s highest court in the Freedom Mortgage v. Engel case and prohibits mortgage servicers in the state from unilaterally halting a foreclosure action and restarting the loan’s statute of limitations in order to offer homeowners all loss mitigation opportunities. FHFA joined the industry in opposing this bill, and MBA and the NYMBA urged the Governor to veto it. Although MBA had worked constructively with NYDFS for months to provide data supporting the industry’s articulate deep policy concerns and provide suggested amendments to preserve servicers’ ability work constructively with homeowners on loss mitigation options. 

• Why it matters: This law went into effect immediately on December 30, and amendments are needed to at least limit this policy to foreclosure actions that occur prospectively from the enactment date. 
• What’s next: MBA and NYMBA will continue to advocate on this issue and will pursue all opportunities to mitigate the problematic provisions of this law.

For more information, please contact William Kooper at (202) 557-2737 or Kobie Pruitt at (202) 557-2870.

Montana Legislature Approves Bill to Authorize MLO Remote Work, Implement CSBS Model Servicing Standards

​Last week, critical changes to Montana’s mortgage policy statutes (HB-30) that have been supported by the Montana Mortgage Association were overwhelmingly approved by the Montana Senate and now await transmission to Governor Greg Gianforte. The legislation, which was approved by the House in January, would implement the model for capital, liquidity, and governance standards for nonbank servicers issued by the Conference of State Bank Supervisors that MBA helped shape. It would also codify standards for Montana-licensed mortgage loan originators to work from somewhere other than a licensed location. Significantly, the bill’s section on remote work follows the contours of MBA’s model state law and regulation.

• Why it matters: 21 states and D.C. have enacted policies that permanently allow MLOs to work from a remote location. Adoption of the CSBS model for nonbanks helps maintain similar requirements across multiple states.
• What’s next: MBA will continue to work with its partner state associations to support the pursuit of consistent laws and rules among state policy makers.

For more information, please contact William Kooper (202) 557-2737.

Register Today for MBA’s mPact Summit on March 7 

​On March 7, mPact, MBA’s network for young professionals, will host its first mPact Summit in Plano, Texas. Join an exclusive group of young professionals from both the residential and commercial/multifamily real estate finance sectors for a day of career development and industry programming. Young professionals have selected the sessions and developed networking opportunities with senior leaders for this inaugural event. 

• Why it matters: Event topics include developing leadership skills, learning how to navigate your career, and building and practicing networking skills. You won’t want to miss this opportunity. 
• What’s next: Registration is capped at 100 participants and closes on February 27. Register now.

For more information, please contact Jacky Salazar at (202) 557-2746.

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:

• Townstone Financial: Implications and Takeaways – February 14
• Five Steps to Improve Efficiency, Compliance and Automation in Your Mortgage Operations – February 16
• Single Family Rental Remains Resilient – February 23
• Market Recommendations and Profitability Insights for 2023 – February 28
• Top Commercial Mortgage Servicing Issues in 2023 – March 6
• Responsibly Using AVMs and AI to Automate Appraisal Underwriting – March 8

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.