MBA Advocacy Update, Mar. 27, 2023
FHFA Announces Process for Implementing New Credit Score Requirements
On Thursday, the Federal Housing Finance Agency announced plans for stakeholder input as Fannie Mae and Freddie Mac work to replace the Classic FICO credit score model with the FICO 10T and the VantageScore 4.0 credit score models, and transition from requiring three credit reports (or “tri-merge”) to requiring two credit reports (or “bi-merge”) for single-family loan acquisitions. FHFA also provided estimated implementation dates for these requirements:
- Bi-merge credit report implementation could occur by first quarter 2024
- Delivery and disclosure of the additional credit scores, estimated to begin in third quarter 2024
- Incorporation of the new credit score models into pricing, capital and other processes, estimated to occur in fourth quarter 2025
- Why it matters: The validation of FICO 10T and VantageScore 4.0, announced at the MBA Annual Convention last October, will require significant revisions to operational processes and policies across the industry.
- What’s next: MISMO has actively engaged with the industry to identify potential implementation issues ahead of the multiyear transition, and MBA will continue to engage with members and provide necessary feedback to FHFA. MBA has encouraged FHFA and the GSEs to consider the entire mortgage ecosystem – not just GSE processes – in the implementation plan.
HUD Restores “Discriminatory Effects” Rule
Last Friday, HUD announced a final rule rescinding the Department’s 2020 rule governing Fair Housing Act disparate impact claims and restoring the 2013 discriminatory effects rule. HUD released the following fact sheet to support its decision. MBA, along with other trade organizations, expressed support for the 2020 rule change because it contained important “safeguards” on application of disparate impact theory that better reflect the Supreme Court’s 2015 holding in a landmark case on disparate impact, Texas Department of Housing and Community Affairs vs. Inclusive Communities.
- Why it matters: The final rule will go into effect 30 days after it is published in the Federal Register. Due to a preliminary injunction staying the implementation of the 2020 Rule in Massachusetts Fair Housing Center v. HUD, the 2020 Rule never went into effect, and the 2013 Rule – which has been in place for nearly a decade – has been and is currently still in effect. Accordingly, regulated entities that were complying with the 2013 Rule have no need to change any practices they have in place to comply with this rule.
- What’s next: MBA will continue to monitor the rule change and any associated developments.
Second Circuit Court of Appeals Finds CFPB Funding Structure Is Constitutional
On Mar. 23, the U.S. Second Circuit Court of Appeals found that the Consumer Financial Protection Bureau’s funding structure is constitutional. This case revolves around a law firm challenging the Bureau’s ability to enforce an administrative subpoena on the grounds that the Bureau’s funding structure is unconstitutional. The Court sided with the Bureau finding that the funding structure did not violate the Appropriations Clause because it was authorized by Congress and bound by specific statutory provisions. The Court specifically rejected the Fifth Circuit’s decision in Community Financial Services Association of America, Ltd. v. CFPB, finding no constitutional violation, as the Bureau’s funding mechanism was directed by Congress and specific in how and where the funds were to be drawn.
- Why it matters: This decision creates a Circuit Court split on the constitutionality of the Bureau’s funding. The issue of the constitutionality of the Bureau funding is already before the Supreme Court due to the Fifth Circuit decision and will be heard next term.
- What’s next: MBA will continue to monitor this litigation around the Bureau’s constitutionality and keep members informed of any updates.
Secretary Yellen Testifies Before Senate Appropriations Committee
Last week, the Senate Appropriations Committee’s Subcommittee on Financial Services and General Government and its counterpart House Appropriations Committee’s FSGG Subcommittee held hearings to examine President Biden’s fiscal year 2024 budget request. Treasury Secretary Janet Yellen explained the many policies and provisions found within the Biden administration’s funding request for her Department and defended the administration’s response to the recent bank failures. A summary of the hearings can be found here.
- Why it matters: Yellen detailed how the Internal Revenue Service will use additional funding it has received and urged Congress to vote to raise the federal debt ceiling. She also stated her openness to new financial regulations, including the potential for the Financial Stability Oversight Council to designate non-bank financial institutions for additional oversight (which would require a notice and comment period).
- What’s next: Both the Senate Banking and House Financial Services Committees have scheduled oversight hearings next week on the federal regulators’ response to the recent bank failures.
MISMO Names David Coleman President
MISMO, the real estate finance industry standards organization, named mortgage industry veteran David Coleman as its new president. Coleman has more than 25 years of mortgage industry experience as an IT executive, management consultant, and senior business leader.
- Why it matters: With MBA’s stepped-up investment in MISMO, the organization has become an increasingly important vehicle for streamlining operations and facilitating regulatory compliance for mortgage lenders and servicers. The scope of Coleman’s 25-plus year career includes experience as a financial services and consumer and mortgage lending specialist with experience as a senior IT executive and management consultant.
- What’s next: MISMO will continue to deliver on its mission to reduce costs, increase efficiency, and enhance interoperability across the mortgage finance industry under Coleman’s leadership. He will join MISMO on April 3.
For more information, please contact Jan Davis at (202) 557-2715.
Federal Reserve Announces Ninth Consecutive Rate Hike
The Federal Reserve in its ongoing efforts to slow inflation raised the federal funds rate by another 25 basis points to a target range of 4.75-5.00% on Wednesday.
- Why it matters: This short-term rate hike marks the ninth consecutive increase since March 2022. Additionally, the FOMC anticipates that, “some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”
- MBA’s SVP and Chief Economist Mike Fratantoni noted, “Even with the heightened financial market volatility stemming from recent bank failures, the FOMC decided at its March meeting to increase the federal funds target another 25 basis points. However, this was a ‘dovish hike,’ as the commentary and economic projections suggest we may be at or near the peak fed funds rate for this cycle. Inflation is still quite high, but it is slowing. And while the job market is still quite strong, it is weakening, as evidenced by slowing wage growth. Coupled with the advent of much tighter financial conditions after the events of the past couple of weeks, we are anticipating a much slower economy over the next few quarters — which should further bring down inflation per the Fed’s goal.”
For more information, please contact Mike Fratantoni at (202) 557-2935.
NMLS Proposes Revisions to Mortgage Industry Licensing Process
Last Friday, state regulators on the Policy Committee of the Nationwide Multistate Licensing System and Registry released for comment its Mortgage Business-Specific Requirements Proposal. The announcement is a component of the efforts to modernize the NMLS, and its licensing requirements framework, which has three categories: core requirements, business-specific requirements, and license-specific requirements. Key aspects of this proposal include questions related to mortgage business activities; business contacts; periodic reporting and location reporting; and, documentation, including financial statements.
- Why it matters: This is an opportunity to advocate for streamlining the licensing process and for creating uniformity among state requirements.
- What’s next: MBA will convince members to review the proposal and develop comments ahead of the May 15, 2023, due date.
For more information, please contact William Kooper (202) 557-2737.
Register Today: MBA’s National Advocacy Conference – April 18-19
Registration remains open for MBA’s National Advocacy Conference taking place 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:
- Meet the Homeseeker: 2023’s Most Important Borrower – March 30
- Deciphering ESG in Affordable Multifamily Lending – March 30
- Warehouse Lending: Latest Activity, Trends and Developments – April 12
- Multifamily Finance Faces Headwinds Head-On – April 18
- 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.