MBA Advocacy Update Apr. 3, 2023

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

Please join us this Monday, April 3, for the next Town Hall with MBA Leadership. We continue to monitor the fallout from the SVB/Signature Bank failures, and while it’s still too early for any definitive lessons learned, we will provide members with updates on what happened at SVB and Signature and what other risks are being evaluated, the economic and market impacts of the failures, and a preview of possible policy responses under consideration by the banking agencies, Treasury, and Congress.  

Registration remains open for MBA’s National Advocacy Conference (NAC) to be held in less than a month on April 18 and 19 in Washington, D.C. Attending this critical event will allow you to connect directly with elected officials in our nation’s capital. Register today. 

FHFA Enhances Payment Deferral for Borrowers Facing Financial Hardship

On Wednesday, the Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac will allow borrowers facing financial hardship to defer up to six months of mortgage payments.  

• Why it matters: MBA recommended in a January letter to FHFA and in a recent white paper that utilizing payment deferrals (and partial claims for FHA loans) allows borrowers, regardless of the reason for hardship, to quickly resume timely payments after resolving a temporary hardship. In press statement, MBA President and CEO, Bob Broeksmit, CMB, stated, “MBA commends FHFA for applying lessons learned from the COVID-19 pandemic by making payment deferrals a key part of Fannie Mae’s and Freddie Mac’s loss mitigation toolkit. The use of payment deferral during the pandemic helped struggling homeowners stay in their homes.” 
• What’s next: Servicers may begin to evaluate borrowers for the payment deferral as early as July 1, but no later than October 1. Fannie Mae’s announcement is here. Freddie Mac’s is here. 

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

MBA Responds to USDA’s Loss Mitigation Proposal 

On Tuesday, MBA submitted comments to the U.S. Department of Agriculture’s proposal to eliminate the subordinate lien for the Mortgage Recovery Advance, otherwise known as a partial claim. Under the proposal, the missed payments would be recovered through a deferred balance secured under the original mortgage note. MBA supports USDA’s proposal but recommend that USDA resolve several operational challenges. 

• Why it matters: Given economic uncertainty and the high-interest rate environment, USDA expects to complete more MRAs in the coming months and years. Eliminating the subordinate lien creates greater alignment with the Payment Deferral of Fannie Mae and Freddie Mac and reduces administrative barriers to quickly resolving a borrower’s hardship. However, a deferred balance, although non-interest bearing, also creates a balloon payment at the end of the loan. MBA recommends that USDA:

1. Allow servicers to assign loans to the USDA that have reached their maturity if a borrower completes their amortization schedule but is unable to repay the MRA. This will eliminate the risk of foreclosure and would allow the servicer to release the lien.
2. Preserve the COVID-19 Loss Mitigation Waterfall, including allowing the MRA to remain as the first option.
3. Ensure servicers can redeliver modified loans with a deferred balance. Currently, Ginnie Mae policy expressly prohibits loan modifications with deferred balances from being redelivered into a Ginnie Mae. 
4. What’s next: MBA will follow ongoing developments as USDA moves toward issuing a final rule.  

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

Housing/Real Estate Coalition Weighs in on Debt Limit

Last week, a group of 14 commercial, multifamily, and residential real estate groups (including MBA) sent a letter to congressional leaders urging the White House and Congress to work together to raise the statutory debt limit as soon as possible. After meeting in person in February, President Joe Biden and House Speaker Kevin McCarthy (R-CA) this week exchanged letters framing the key issues for discussion should debt ceiling negotiations begin in earnest (in coming weeks) on this highly charged topic. 

• Why it matters: Given the more than $10.3 trillion in outstanding mortgage debt backed by the federal government through the GSEs, Ginnie Mae, and other federal agencies, the housing and real estate markets are particularly susceptible to an instability stemming from concern about the U.S. meeting its financial obligations.       
• What’s next: Treasury Secretary Janet Yellen has notified Congress that extraordinary measures to meet the country’s debt obligations will likely be exhausted by this June. MBA will continue to closely monitor this critical debate as budget, appropriations, and debt limit discussions between the White House and Congress start to take shape.

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

MBA Highlights Concerns Regarding Proposed SEC Conflicts Of Interest Rule

Last week, MBA submitted a letter to the Securities and Exchange Commission in response to its proposed rule to Prohibit Conflicts of Interest in Certain Securitizations. The proposed rule would implement Section 27B of the Securities Act and generally provides, with some exceptions, that a securitization participant in an asset-backed security cannot engage in any transaction that would result in a material conflict of interest with respect to any investor in such transaction. The proposed rule, as written, is overly broad and could inadvertently prevent “normal course of business activities” for both commercial and residential members. The letter recommends changes to ensure that servicers, special servicers, and B-Piece buyers are not considered “sponsors,” that Mortgage Insurance-linked Notes (MILNs) and Credit Risk Transfer (CRT) transactions are not considered conflicted transactions, and that MILNs are not considered synthetic asset-backed securities under the rule. 

• Why it matters: While MBA appreciates the need for the Commission to prevent transactions that present material conflicts of interest between certain securitization participants and investors, it is important that the proposed rule does not stifle the efficiency of the securitization market and the crucial role it serves in providing liquidity or prevent various market participants from effectively managing risk. 
• What’s next: MBA will continue its engagement with the SEC and monitor developments as the rule moves towards finalization. MBA may also connect with other trades to submit subsequent follow up letters to further stress concerns. 

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

Federal Banking Regulators on Recent Bank Failures

This week, the Senate Banking and House Financial Services Committees each held hearings to examine the recent failures of Silicon Valley Bank and Signature Bank. The discussion featured testimony from several of the nation’s top financial regulators — including Federal Reserve Vice Chair for Supervision Michael Barr, Federal Deposit Insurance Corp. Chair Martin Gruenberg and Treasury Department Undersecretary for Domestic Finance Nellie Liang. 

• Why it matters: Lawmakers probed the witnesses on topics ranging from the root cause of the failure of these banks, the ensuing response from regulators, bank risk management practices, interest rate risk impacts on non-banks, and whether regulators failed in their supervisory roles. A detailed summary of both hearings can be found here.
• What’s next: Additional hearings with state regulators and bank executives are possible. MBA continues to ensure that policymakers learn the right lessons from these events by sifting through the political noise, gathering reliable intelligence and data, and advocating for appropriately tailored policy responses.

For more information, please contact Ethan Saxon at (202) 557 2913, Tallman Johnson at (202) 557 2866, Alden Knowlton at (202) 557-2741, and/or Borden Hoskins at (202) 557-2712.

GSEs Preview Update of UAD and URAR

On Wednesday, Fannie Mae and Freddie Mac released implementation resources ahead of major revisions to the Uniform Appraisal Dataset and Uniform Residential Appraisal Report. The GSEs will update the appraisal dataset and replace multiple GSE appraisal forms with a single data-driven, flexible, and dynamic appraisal report for any residential property type. Implementation resources include a Playbook, Technical Specifications, and URAR examples. The announcement also provided a high-level timeline for development and testing, but not for implementation.

• Why it matters: The GSEs indicate that the updates will enhance appraisal quality and compliance. Previous discussions with MBA members, however, indicate that the impact of the changes to industry will be significant. The announcement and implementation resources did not include cost estimates for industry to implement.
• What’s next: MBA will continue to engage with members and provide necessary feedback to the GSEs.

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

Massachusetts Enacts Remote Online Notarization Law

Massachusetts Governor Maura Healey signed into law H-58 (Chapter 2 of the Acts of 2023) this week, which contains MBA-supported language to permit remote online notarization for real estate transactions in the Commonwealth. As a result of strong advocacy by the Massachusetts MBA, the RON provisions were added to must-pass appropriations legislation that was sent to the Governor on March 23. Among the elements of the new law is an affirmation of an Massachusetts requirement that only an attorney that is licensed to practice law (or a non-attorney under the direct supervision of the attorney) may conduct real estate closings. This success is the result of several years of coordinated advocacy of MBA and the MMBA, and the victory will be beneficial to the discussion in attorney closing states that have yet to enact RON.

• Why it matters: 43 states and the District of Columbia have now enacted RON laws consistent with the MBA-ALTA model. 
• What’s next: State regulators have until January 1, 2024, to implement regulations.

For more information, visit MBA’s RON resource center or contact William Kooper (202) 557-2737.

Virginia Governor Signs Legislation to Permit Remote Work for MLOs

Last Sunday, Virginia Governor Glenn Youngkin (R) signed legislation (HB 2389) supported by the Virginia MBA that will allow mortgage loan originators to work away from a licensed branch location. HB 2389 requires licensees to employ appropriate risk-based monitoring and oversight processes. In addition, it prohibits in-person customer interactions at an employee’s or exclusive agent’s residence, unless the residence is an approved office.       

• Why it matters: HB 2389 is consistent with MBA’s model law and regulation, and with policies of other states that have acted to permit remote work. Currently, there are 24 states plus the District of Columbia that have enacted legislation, promulgated rules, or issued regulatory guidance that permanently allows MLOs to work from a remote location.
• What’s next: MBA will continue to work with its state and local association partners to advocate for its model language to create licensing flexibility in any state that mandates MLOs work from a licensed location. 

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

MBA and NCSHA Launch HFA1 Affordable Homeownership Lender Toolkit

Last week, MBA, along with the National Council of State Housing Agencies announced the HFA1 Affordable Homeownership Lender Toolkit, a new online resource that will enable home mortgage lenders to partner with state housing finance agencies in providing mortgage loans and down payment assistance to lower-income homebuyers. The HFA1 Lender Toolkit identifies key features of HFA homeownership programs that are most important for lenders in determining how and where to partner with the agencies. The development of the toolkit reflects substantial progress by a growing number of agencies to align elements of their programs to support more efficient participation in them by regional and national lenders.

• Why it matters: Through a multi-year process with leading members of MBA and other industry stakeholders, a group of 13 HFAs reduced or eliminated loan “overlays,” created a common loan delivery checklist to reduce operational differences and aligned their affordable mortgage and down payment assistance requirements in numerous areas. These developments will save lenders time and money throughout the mortgage process, generating cost savings for borrowers. 
• MBA’s President and CEO Bob Broeksmit, CMB, said, “I commend the MBA members and state housing finance agencies that have worked hard for the past two years to establish greater efficiencies and new tools to expand affordable mortgages and down payment assistance to people and places that need it.”

For more information, please contact Steve O’Connor at (202) 557-2867.

Register Today: MBA’s National Advocacy Conference – April 18-19

​Registration remains open for MBA’s National Advocacy Conference April 18-19 in Washington, D.C. Attending this critical event will allow you to connect directly with elected officials in our nation’s capital. Your story matters – share it with key policymakers as they consider legislation that affects our industry.

• Why it matters: NAC gives you the opportunity to share your member company’s narrative with key congressional staff and elected officials – while networking with your industry colleagues.
• What’s next: Share your story and lend your voice on behalf of our industry next month!  Register for yourself – and encourage your colleagues to attend – today at mba.org/nac.

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

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:

• Warehouse Lending: Latest Activity, Trends and Developments – April 12
• Multifamily Finance Faces Headwinds Head-On – April 18
• Turn Distressed Mortgage Loans into Performing Portfolios Faster – April 20
• ROI Guide to Risk & QC Technology – April 25
• What Trends will Shape the Lending Space in the Second Half of 2023 – June 1

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.