MBA Advocacy Update May 8, 2023
MBA Calls for Rulemaking on Reg X Loss Mitigation Procedures
On Thursday, MBA requested the Consumer Financial Protection Bureau to proceed with rulemaking to amend the early intervention requirements and loss mitigation procedures under Regulation X. MBA made several recommendations, including that the Bureau create a clear standard for when a servicer must consider a borrower to have submitted a “loss mitigation application.” An unambiguous standard provides flexibility for servicers to comply with various investor/guarantor guidelines regarding loss mitigation application requirements. MBA also urged the Bureau to make a public commitment to amend Regulation X, given that such rulemaking is not currently on the Regulatory Agenda.
- Why it matters: MBA believes it is important to move quickly to formally amend Regulation X to incorporate the lessons learned from the COVID-19 pandemic. As MBA noted in its white paper regarding the Future of Loss Mitigation, updating the loss mitigation regulations under Regulation X is imperative to create a clear and durable regulatory framework for consumers and servicers. MBA remains committed to providing home retention options for borrowers facing temporary financial hardships. Amendments to Regulation X are needed to ensure mortgage servicers can timely assist distressed borrowers in any market conditions and to promote an efficient loss mitigation experience for consumers.
- What’s next: MBA will continue to advocate for rulemaking and communicate any progress to members, including a proposed rule.
For more information, please contact Brendan Kelleher at (202) 557-2779.
CFPB Proposes Long-Anticipated PACE Financing Rules
On Monday, the CFPB released a long-awaited proposed rule to establish nationwide consumer protection standards for residential Property Assessed Clean Energy loans. The proposal is a significant milestone in MBA’s multiyear advocacy campaign to extend consumer mortgage rules to PACE obligations. The proposed regulation defines PACE obligations as consumer credit, making it clear that the Truth in Lending Act applies generally to PACE financing. The rule would also subject PACE obligations (and providers) to Ability-to-Repay requirements, modified TRID disclosures, and the civil liability provisions of TILA for violations. CFPB’s proposal follows its Advanced Notice of Proposed Rulemaking in 2019, on which MBA offered comments.
- Why it matters: PACE loans are structured like home improvement or home equity loans, but because they are collected as part of local property taxes, they have skirted all the federal consumer mortgage rules. The tax roll aspect also provides them lien priority over first mortgages. In light of well-documented consumer abuses and the threats to first lien status, MBA has long advocated for both issues to be addressed. The proposed CFPB rule is the final stage of MBA’s successful efforts in 2017 to include in S.2155 (Public Law No. 115-174) requirements covering PACE liens under federal consumer protection rules. MBA has also successfully advocated with state MBA partners for consumer protections in California, Minnesota and Ohio. The Minnesota and Ohio laws also require subordination of PACE obligations to existing liens.
- What’s next: MBA is closely reviewing the draft rule, will discuss it with member committees, and draft comments ahead of the July 26, 2023, due date. MBA will also continue to work with state partners to address lien priority and other consumer protection issues.
Florida Legislature Approves MLO Remote Work
Last week, with support of the MBA of Florida, a bill (HB-1185) that includes a provision to authorize state licensed mortgage loan originators (MLOs) to work outside a licensed location was unanimously approved by the Florida Senate. The bill previously cleared the House unanimously, and now awaits consideration by Governor Ron DeSantis. Significantly, the bill’s section on remote work follows the contours of MBA’s model state law and regulation.
- Why it matters: 25 states and D.C. have enacted policies that permanently allow MLOs to work from a remote location.
- What’s next: MBA will continue to work with its partner state associations to support remote work policies consistent with the association’s model.
House, Senate Committees Hold Hearings on National Flood Insurance Program
Over the past two weeks, the House Financial Services Subcommittee on Housing and Insurance and the full Senate Banking Committee held respective hearings on the reauthorization of the National Flood Insurance Program. A summary of the hearings can be found here.
- Why it matters: Congress has extended the NFIP 25 times since 2017. The latest extension will expire on September 30, 2023.
- What’s next: It is unlikely that Congress will reach consensus on how to reform the NFIP, setting up the need for another short-term extension into Fiscal Year 2024.
Senate Banking Subcommittee Holds Rural Housing Hearing
On Tuesday, the Senate Banking Subcommittee on Housing, Transportation, and Community Development held a hearing titled, “Rural Housing Legislation.” MBA submitted testimony in support of a discussion draft entitled the Rural Housing Service Reform Act, which authorizes improvements to the Rural Housing Service’s staffing and information technology capabilities.
- Why it matters: The Senate Banking Committee must approve any housing-related provisions that could eventually be included in a long-term Farm Bill reauthorization.
- What’s next: Subcommittee Chair Tina Smith (D-MN) and Ranking Member Cynthia Lummis (R-WY) will seek to put together an evolving bipartisan package of rural housing proposals for the full committee to consider.
New York Budget Enacted Without Action on Housing Plan
Last week, following months of negotiations on the 2023-2024 state budget, New York Governor Kathy Hochul and legislative leaders agreed on a new fiscal plan. Unfortunately, no compromise was achieved on competing proposals to address New York’s housing supply and affordability needs. MBA-supported policies proposed by the Governor, such as commercial-to-residential building conversions or an extension of the Section 421-a tax incentive, received no action. In a positive development, however, the final budget excluded a plan for taxing mezzanine debt and preferred equity investment, as well as language related to “good cause” eviction.
- Why it matters: Enactment of a state budget does not conclude the legislative year. Lawmakers will continue their work through at least mid-June, and important initiatives, including proposals on good cause eviction and rent control, have been or may be considered in separate bills.
- What’s next: MBA will continue to work with the New York MBA to monitor the progress of legislation in Albany and will coordinate any appropriate response to developments with all allied industry partners.
Federal Reserve Announces 10th 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 5.00-5.25% on Wednesday.
- Why it matters: The Fed’s short-term rate hike marks the tenth consecutive increase since March 2022, with the Fed noting that they “will continue to monitor the implications of incoming information for the economic outlook” and “take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments” in regards to future monetary policy decisions.
- MBA’s SVP and Chief Economist Mike Fratantoni noted, “We expect that the Fed will be ‘data dependent,’ and certainly would react to any renewed increase in inflation, but today’s statement is consistent with a plan to pause rates at this level. Inflation is likely to trend down over the course of the year, particularly as weakness in the rental market begins to be reflected in the inflation numbers. In the near term, tighter credit conditions will slow the pace of economic activity. The housing sector is already operating under tight credit, so we don’t expect this headwind to outweigh the benefits from somewhat lower mortgage rates. The housing market is likely pulling the economy out of this slowdown, as it typically does.”
For more information, please contact Mike Fratantoni at (202) 557-2935.
MBA Submits Comments on CFPB Review of Regulation Z’s Mortgage Loan Originator Rules
On Monday, MBA submitted comments on the CFPB’s review of the Mortgage Loan Originator Rules. The review is required pursuant to the Regulatory Flexibility Act because of the significant impact on small entities. MBA’s letter made several recommendations, including urging the Bureau to allow a lender to agree to decrease a loan originator’s compensation to compete with other lenders, allowing changes or claw backs to loan originator compensation in the case of error or fraud, and to provide for variations in MLO compensation for bond loans, construction loans, Special Purpose Credit Program loans, Down Payment Assistance Loans, and assumptions. The recommendations are similar to past MBA advocacy on the Loan Originator Compensation Rule in response to a previous Bureau Request for Information. Additionally, MBA asked the Bureau to narrow the definition of loan originators and to publish guidance on several other issues.
- Why it matters: While the Regulatory Flexibility Act review requirement should not necessarily be interpreted as a desire by the Bureau to revise the rule, it does provide MBA an opportunity to reiterate the need for our long-recommended changes to the Mortgage Loan Originator Rules.
- What’s next: MBA will monitor the review process and will continue to urge the Bureau to consider our recommendations.
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:
- Managing Opportunity and Risk in Volatile Economic Conditions – May 16
- Leveraging AI, Blockchain & New Technologies in Today’s Challenging Environment – May 17
- Explore Build-to-Rent Advantages, Trends & Opportunities – May 18
- MSR Transfers: Balancing Risk, Customer Experience and Efficiency – June 15
- Office Doldrums: Challenges, Opportunities, and Nuances – July 26
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.