MBA Advocacy Update June 5, 2023

  1. Congress Clears Debt Ceiling Legislation; President Joe Biden to Sign Quickly

On Wednesday evening, the House of Representatives passed H.R. 3746, the Fiscal Responsibility Act, by a strong bipartisan vote of 314-117. The Senate quickly followed suit yesterday, passing the measure without amendment by a tally of 63-36.

In return for suspending the debt limit until January 1, 2025, the legislation, negotiated by President Joe Biden and House Speaker Kevin McCarthy (R-CA), creates caps on defense- and non-defense discretionary spending for Fiscal Years (FY) 2024 and 2025, rescinds $28 billion in unspent COVID-19 emergency funding, halts a portion of previously-authorized funding for the Internal Revenue Service (IRS), codifies the end of the student loan repayment pause (already scheduled to end on June 30, 2023), extends work requirements for certain nutrition assistance programs, and enacts certain energy project permitting reform provisions, among other items.

The negotiated deal also contains language that provides incentives for the Congress and the President to work in a bipartisan fashion to finish all 12 appropriations bills for FY 2024 and 2025. If agreements are not reached, and appropriations are operating via a short-term Continuing Resolution (CR), a “sequestration” would be ordered to maintain the integrity of discretionary spending limits.

• Why it matters: Treasury Secretary Janet Yellen had notified Congress that “extraordinary measures” to meet the country’s debt obligations would likely be exhausted by June 5. MBA closely monitored negotiations between the White House and Congress in recent months and remained in regular contact with Treasury, the Department of Housing and Urban Development (HUD), and key congressional leaders. In late March, MBA led a broad real estate coalition letter addressed to congressional leaders urging the White House and Congress to take steps to raise the federal debt ceiling well in advance of risking default.
• What’s next: The “clawback” of previously authorized, but unspent, COVID-related funds include an estimated portion of previously allocated Emergency Rental Assistance and Homeowner Assistance funds, as well as a small portion of HUD and USDA program funding. MBA will continue to actively work with key appropriators to seek enactment of our FY2024 funding priorities.
For more information, please contact Bill Killmer at (202) 557-2736.

  1. FHA Proposes New Foreclosure Prevention Solution

On Wednesday, the Federal Housing Administration (FHA) posted a proposed Mortgagee Letter (ML) to the Single-Family Drafting Table, establishing its newest loss mitigation option that provides payment relief for distressed borrowers who are delinquent on their mortgage payments. The Payment Supplement Partial Claim (PC) allows Mortgagees to use a partial claim to cure a borrower’s arrearages and temporarily reduce the principal portion of a borrower’s monthly mortgage payment for 3-5 years. The Payment Supplement PC is intended to assist borrowers in default who are unable to obtain a significant payment reduction through other loss mitigation options.

• Why it matters: FHA’s highly anticipated proposal expands FHA’s loss mitigation toolkit by creating an additional solution for struggling borrowers in high-interest rate environments. For borrowers unable to resume their regular payment, the Payment Supplement PC allows servicers to offer borrowers additional payment relief while preserving their existing below market interest rate, without completing and redelivering a loan modification to Ginnie Mae. FHA’s proposal recasts the use of a traditional loss mitigation tool – the partial claim – to subsidize a borrower’s monthly payment. A summary can be found here.
• What’s next: In response to a December 2022 letter from MBA, FHA posted the ML to the drafting table to afford stakeholders the opportunity to recommend improvements to the new program. Comments are due to FHA by Friday, June 30, 2023. MBA will formulate its response through its Loan Administration Committee.

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

  1. MBA Joins Broad Coalition Requesting Uniform ROV Process

On Tuesday, MBA joined several trade associations, consumer advocates, and industry participants in a letter that recommends a uniform Reconsideration of Value (ROV) process from the GSEs (Fannie Mae and Freddie Mac) and agencies participating in the Property Appraisal and Valuation Equity (PAVE) Task Force. The letter advocated for structured stakeholder engagement, and a clear outline of roles, responsibilities and expectations for appraisers, lenders, and borrowers.

• Why it matters: The ROV process is a tool borrowers and lenders can use in the event potential errors in the appraisal are flagged, and/or new information can be presented to the appraiser. That process currently has few standards or guidelines. In February, FHA released a draft ML outlining ROV responsibilities. MBA argued at that time, as it did in this joint letter, that alignment across agencies and investors would produce a clearer process for all participants in the transaction.
• What’s next: MBA will continue to inform PAVE Task Force agencies on where lenders need clarity regarding their ROV obligations. These responsibilities should be considered in relation to appraiser independence requirements. MBA stands by the arguments presented in its recent amicus brief filing in the Connolly Case, including its interpretation of Equal Credit Opportunity Act (ECOA) and Fair Housing Act liabilities.

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

  1. White House Announces PAVE Task Force Initiative Updates

On Thursday, on the two-year anniversary of the creation of the PAVE Task Force, the Biden Administration released a factsheet outlining multiple initiative updates, including a proposed rule for quality control standards for Automated Valuation Models (AVMs). The Administration also announced the release of guidance for homeowners to make valuation appeals based on allegations of racial bias and outlined plans to release public data on 600,000 home valuations to better inform valuation models. The Administration will, additionally, publish an online dashboard outlining differences in state appraisal licensing requirements, and are calling on states to remove unnecessary barriers to entry for the appraisal profession.

• Why it matters: The PAVE Task Force’s multi-pronged approach reflects the complex nature of the issue of impacts of potential racial bias within the valuation process.
• What’s next: MBA will continue to engage with the Biden Administration and PAVE Task Force agencies on lenders’ role in fielding accusations of racial bias in the valuation process, and how data releases can support a fair and more transparent valuation process.

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

  1. RON Updates in California and Connecticut

This week, remote online notarization (RON) bills in California (SB 696) and Connecticut ( SB 1040) progressed closer toward enactment. In California, SB 696 passed the Senate ahead of an important procedural deadline, while a competing Assembly bill, AB 743, did not. The industry will now focus on SB 696 to enact RON into California. As written, SB 696 does allow interstate recognition for RON and includes a private right of action for RON platform and journal vendors operating in the state. Connecticut’s legislation, which moved to a conference committee, continues to exclude real estate transactions. MBA in coordination with Connecticut Mortgage Bankers Association issued a Mortgage Action Alliance Call to Action in May urging lawmakers to remove that prohibition.

• Why it matters: 44 states and D.C. have enacted RON legislation to bring additional options to consumers and lenders.
• What’s next: MBA is working in coordination with the California MBA to resolve any barriers for SB 696 to pass in the Assembly as written. In addition, MBA continues to support efforts in Connecticut to remove the real estate prohibition before the legislative session adjourns next week.
For more information, please contact William Kooper at (202) 557-2737 or Liz Facemire at (202) 557-2870.

  1. 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:

• Profit & Succeed with Down Payment Assistance Programs – June 8
• Benchmarking for Performance and the Performance Ratios Every Mortgage Banker Must Know – June 13
• MSR Transfers: Balancing Risk, Customer Experience and Efficiency – June 15
• How to Leverage Document AI for Unparalleled Efficiency in Loan Production and Loan Servicing – June 27
• Mastering Revenue Metrics of Construction to Permanent Loans – July 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.