MBA Advocacy Update May 30, 2023

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

1. FHFA Director Thompson Testifies Before House Financial Services Committee

Last Tuesday, Federal Housing Finance Agency (FHFA) Director Sandra Thompson testified before the House Financial Services Committee (HFSC). Similar to last week’s Housing & Insurance Subcommittee hearing, much of the discussion focused on the FHFA loan-level pricing adjustment (LLPA) updates to the GSEs’ pricing framework announced in January. There were also questions on credit risk transfers, title insurance requirements, appraisal bias, small-dollar mortgage loans, adjustable-rate mortgages, the GSEs’ equitable housing finance plans, and the debt limit, among other issues. A number of questions were asked by a bipartisan slate of committee members on topics of key interest to MBA members, such as: FHFA’s Federal Home Loan Bank (FHLB) review, the GSEs’ implementation of the proposed bi-merge credit reports, the future of the GSEs’ ongoing conservatorship, and concerns regarding GSE pricing variations for Third-Party Originated (TPO) loans.

• Why it matters: Hearing questions from elected officials can sometimes place pressure on an agency like FHFA to resolve issues garnering significant attention, including the implementation of specific programs and the nature of enforcement actions. A complete summary of the hearing can be found here.
• What’s next: House Republicans noticed GSE pricing-related legislation as a part of the Thompson hearing. That bill (H.R. 3564) advanced via a committee markup the next day and will likely receive a full House floor vote in the coming months.
For more information, please contact Alden Knowlton at (202) 557-2741 or Borden Hoskins at (202) 557-2712.

2. House Financial Services Committee Passes the Middle Class Borrower Protection Act

On Wednesday, the HFSC held a markup hearing that included taking action on H.R. 3564, the Middle Class Borrower Protection Act of 2023. The legislation was introduced by Representative Warren Davidson (R-OH) following the implementation of FHFA’s revised GSE pricing grid on May 1, 2023. MBA’s letter to the HFSC leadership regarding H.R. 3564 can be found here .

• Why it matters: The bill, if enacted, would rescind the most recent FHFA changes to the revised grid, institute a freeze on any additional LLPAs until the Government Accountability Office (GAO) has issued a report on the recent changes, prohibit FHFA from using a debt-to-income (DTI) ratio calculation in any future LLPAs, and require any future LLPAs to adhere to a “risk-based pricing” structure (as closely as possible).
• What’s next: The Committee passed the measure by a party line vote of 26-22. A full House floor vote on the bill is expected in the coming months. MBA will continue its engagement with FHFA, lawmakers, and industry stakeholders to ensure clarity and transparency regarding the GSEs’ pricing framework.

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

3. Senators Introduce Bill to Make Small Business Tax Parity Provision Permanent

This week, Senator Steve Daines (R-MT) and other senators introduced the Main Street Tax Certainty Act, which would make the 20 percent pass-through business tax deduction for Qualified Business Income (QBI) permanent. MBA helped craft a trade coalition letter showing strong support for the legislation, which can be found here.

• Why it matters: The 2017 Tax Cuts and Jobs Act created Section 199A of the Internal Revenue Code, which allows pass-through businesses to deduct up to 20 percent of qualifying business income. The deduction, which was created to allow LLCs and S Corps relative tax parity with C Corp entities benefiting from a lower corporate tax rate, is currently slated to expire at the end of 2025.
• What’s next: Any tax reform legislation introduced during the current divided Congress faces a challenging path to enactment. Nonetheless, maintaining the Section 199A deduction over time remains a key advocacy priority for MBA.
For more information, please contact Ethan Saxon at (202) 557-2913 or Tallman Johnson at (202) 557-2866.

4. MBA Submits Recommendations on the VA Servicing Purchase Program

On Monday, MBA and the Housing Policy Council submitted recommendations to the Department of Veterans Affairs (VA) regarding its new Servicing Purchase Program (VASP). VASP is expected to be introduced as VA’s new loss mitigation program for distressed veteran borrowers for high-interest rate environments. MBA’s recommendations follow several conversations with the VA throughout the development of VASP.

• Why it matters: VASP will allow borrowers to modify their loan to a below market interest rate after the VA purchases the loan from the servicer. To facilitate a successful program to help borrowers and mitigate operational and compliance risk for servicers, MBA recommended that VA design a streamlined process for mortgage servicers and use objective parameters to identify eligible borrowers.
• What’s next: The industry expects VA to introduce VASP by July 1, 2023. MBA will continue to communicate progress to members and engage with VA on policy discussions and feedback.
For more information, please contact Brendan Kelleher at (202) 557-5779.

5. Florida Enacts MLO Remote Work

This week, with support of the MBA of Florida, legislation (HB-1185) that includes a provision to authorize state licensed mortgage loan originators (MLOs) to work outside a licensed location was signed 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: Twenty-six states and D.C. have now 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.
For more information, please contact William Kooper at (202) 557-2737 or Liz Facemire at (202) 557-2870.

6. Montana Enacts Broad Data Privacy Bill, the Consumer Data Privacy Act

Last Friday, Montana Governor Greg Gianforte signed the Consumer Data Privacy Act, making Montana the ninth state to enact a broad data privacy law. This bill includes Gramm-Leach-Bliley Act (GLBA) exemptions for financial institutions, affiliates, and data.

• Why it matters: By recognizing the current standard of data protection provided under the GLBA, the bill ensures the mortgage industry in Montana can continue to protect consumer information pursuant to existing federal guidelines (while instituting much-needed regulation for other sectors of the economy). Without a national standard, compliance costs that vary from state-to-state increase costs for consumers and lead to a lower level of competition in the mortgage market.
• What’s next: Since 2018, the push for broad data privacy legislation has been gaining traction across many states. This trend is expected to continue and gain momentum. It is important for member companies and state and local association partners to continue to coordinate with MBA to help educate policymakers on the importance of the GLBA exemption to our industry in their respective states.
For more information, please contact William Kooper (202) 557-2737 or Liz Facemire (202) 557-2870.

7. Minnesota Becomes Fifth State to Embrace Model Servicing Standards

Minnesota Governor Timothy Walz signed into law Chapter 57 of the Laws of 2023, which implements the model framework for capital, liquidity, and governance standards for nonbank mortgage servicers issued by the Conference of State Bank Supervisors (CSBS). MBA helped shape the CSBS model bill released in 2021 to include key provisions, such as those incorporating by reference the existing and future federal standards used by FHFA and Ginnie Mae. Minnesota follows Connecticut, Maryland, North Dakota, and Montana in becoming the fifth state to implement the CSBS model. The proposal was originally included in separate “stand alone” legislation, but as the state’s legislation session was ending, the language of the bills was included in appropriations legislation and was quickly passed and signed.

• Why it matters: Adoption of the CSBS model for nonbanks helps maintain aligned 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 policymakers.
For more information, please contact William Kooper (202) 557-2737 or Liz Facemire (202) 557-2870.

8. New York DFS Issues Proposed Industry Guidance Regarding Character and Fitness Assessments

Earlier this month, the New York Department of Financial Services (NYDFS) released proposed guidance for companies to use to update their framework for the review and assessment of the character and fitness of company leaders, both upon onboarding and on an ongoing basis. If adopted, the guidance will be applicable to NYDFS-regulated banks and IMBs licensed or chartered under New York law. The guidance applies to each member of a covered institution’s board of directors, board of trustees, and/or board of managers, and each senior officer. While the language of the guidance encourages a “risk-based” approach to implementation and provides a sample questionnaire, the broad reach and lack of specificity in some areas requires further analysis.

• Why it matters: Following recent high-profile bank failures, including one under the supervision of NYDFS, the Department is signaling that it expects tighter controls and scrutiny of company leaders with respect to any potential conflicts of interest or any regulatory issues at companies where they previously served.
• What’s next: MBA is reviewing the proposal and will develop comments in consultation with members of the MBA State Legislative and Regulatory Committee. Comments are due June 30, 2023, and should be directed to BankingComments@dfs.ny.gov.
For more information, please contact William Kooper (202) 557-2737 or Liz Facemire (202) 557-2870.

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:

• What Trends Will Shape the Lending Space in the Second Half of 2023 – June 1
• 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

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.