MBA Advocacy Update Nov. 13: FSOC Finalizes Nonbank SIFI Designation Interpretive Guidance and Analytical Framework and Other News

FSOC Finalizes Nonbank SIFI Designation Interpretive Guidance and Analytical Framework

The Financial Stability Oversight Council (FSOC) voted unanimously to approve finalized Interpretive Guidance that alters the process for the determination and designation of nonbanks as Systemically Important Financial Institutions (SIFIs).

The guidance reinstates FSOC’s ability to directly pursue the designation of an individual firm without first requiring the identification of a particular market activity, as adopted by the Trump Administration’s 2019 Interpretive Guidance.

FSOC also approved a finalized Analytical Framework detailing the factors FSOC considers when evaluating systemic threats to the global financial system. Nonbanks of concern to FSOC include hedge funds, money market funds, payments system providers, crypto assets and mortgage servicers.

Why it matters: Under the new guidance, nonbank financial companies are more vulnerable to the prospect of FSOC review, possible designation, and the resulting enhanced prudential supervision by the Federal Reserve.

What they are saying: In a blog post, MBA President and CEO Bob Broeksmit, CMB, called FSOC’s moves with respect to IMB mortgage servicers an attempt to “impose a solution where no problem exists,” and warned that regulators using their authority to designate IMB servicers as SIFIs would negatively affect the mortgage market and consumers.

Go deeper: MBA does not believe IMBs – individually or as a sector – pose a systemic risk to the entire U.S. financial system and highlighted these concerns in a July 2023 comment letter.

What’s next: Actual designations of any nonbanks — whether hedge funds, money market funds, crypto players, or IMBs — would not be expected until 2024 at the earliest.

MBA will continue to engage with the White House, Treasury Department, and FSOC agencies and staff on this issue.

For more information, please contact Pete Mills at (202) 557-2878, Matt Jones at (202) 557-2933, Mike Flood at (202) 557-2745 or Stephanie Milner at (202) 557-2747.

FHFA Releases Report on FHLBs

Last Tuesday, the Federal Housing Finance Agency (FHFA) released the FHLBank System at 100: Focusing on the Future report, its comprehensive review of the Federal Home Loan Bank (FHLBank) System in anticipation of the System’s centennial in 2032.

What they are saying: MBA’s Pete Mills, SVP of Residential Policy and Strategic Industry Engagement, said in a press statement that “MBA is disappointed that the report fails to engage in a more meaningful examination of the potential benefits of diversifying the FHLB system through the expansion of membership to other critical providers of mortgage origination, servicing, and investment activities.”

Mills added, “A more diverse FHLB membership would reinvigorate the system and expand access to credit, lower pricing, and increase choices for consumers.”

Why it matters: The report outlined four key themes on the FHLB System, including its mission, liquidity, housing and community development, and operational effectiveness and governance. FHFA also said it plans to update and clarify its regulatory statement on the FHLB System to reflect the FHLBanks’ two core objectives: 1) providing stable and reliable liquidity to their members, and 2) supporting housing and community development.

Go deeper: MBA stressed the importance of expanding FHLB membership to institutions that are almost exclusively focused on housing finance in an October 2022 comment letter.

What’s next: MBA will remain engaged with FHFA, the FHLBs, and lawmakers on both sides and will continue to advocate for expanding membership to institutions like IMBs and mortgage REITs that are almost exclusively focused on housing finance, while ensuring the safety and soundness of the FHLB system.

For more information, please contact Pete Mills at (202) 557-2878 or Sasha Hewlett at (202) 557-2805.

House and Senate Consider Approaches to Another Stopgap Funding Measure to Avoid Shutdown

Last week, House and Senate leaders considered alternative approaches to another stopgap Continuing Resolution to fund the federal government past November 17. Majority Leader Chuck Schumer (D-NY) is poised to file a procedural motion that would allow the Senate to vote on a CR next week that would extend federal funding through mid-December. Conversely, newly installed House Speaker Mike Johnson (R-LA) is rumored to favor a CR that extends through mid-January but would require a “laddered” series of votes on separate appropriations bills by a time certain. As of this writing, it is unclear if agreement on a new CR can be reached by the November 17 deadline – and a shutdown beginning at midnight on Saturday, November 18, is certainly possible.

Why it matters: As in past years, if there is a shutdown, federal agencies, including the Department of Housing and Urban Development (HUD) will cease to function normally. National Flood Insurance Program (NFIP) authorities are also scheduled to expire on November 17.

MBA has created a guide outlining how HUD (including FHA and Ginnie Mae), VA, and USDA would be directly affected by the furlough of government employees and the curtailment of agency operations. MBA has continued its coalition advocacy to stave off a lapse in the NFIP by urging congressional leaders to act quickly on an extension – either separately or within the vehicle of a CR.

What’s next: The politics of reaching House/Senate agreement on a CR are complicated by the need to consider supplemental funding for military aid to Ukraine and Israel, border security measures, and domestic disaster relief.

MBA will continue to voice members’ concerns to key policymakers and staff regarding the detrimental effects of a shutdown — and lapse in NFIP authorities — of any length.

For more information, please contact Bill Killmer at (202) 557-2736, Alden Knowlton at (202) 557-2816, Ethan Saxon at (202) 557-2913 or George Rogers at (202) 557-2797.

Biden Administration Issues Executive Order on Artificial Intelligence

The Biden Administration recently issued an Executive Order that establishes new standards for artificial intelligence (AI) safety aimed at protecting consumer data and promoting innovation and competition.

Why it matters: The EO is indicative of the high level of interest in regulating the use of artificial intelligence while ensuring safety, compliance and fraud and bias prevention.

Independent regulatory agencies are encouraged to address fraud, discrimination, and threats to consumer privacy and financial stability arising from the use of AI.

What’s next: Additional guidance is expected in the near future from federal agencies, including FHFA, the Consumer Financial Protection Bureau (CFPB), HUD, Treasury, and the National Institute of Standards and Technologies (NIST). MBA will keep members informed of any updates.

For more information, please contact Rick Hill at (202) 557- 2718 or Gabriel Acosta at (202) 557 -2811.

MBA Offers Recommendations on Cyber Regulatory Harmonization

MBA submitted a comment letter last week in response to the Office of the National Cyber Director’s (ONCD) Request for Information (RFI) on cyber regulatory harmonization.

Go deeper: MBA supports the harmonization of cybersecurity regulations through a singular Federal data security regime. A single regime is in the best interest of consumers and financial services providers alike.

MBA also recommends that until this is achieved, federal and state governments should work to minimize the cost of complying with multiple data security laws in circumstances where doing so will not compromise consumer protection. The letter also discusses MBA’s data protection principles, harmonizing data security requirements, and data security compliance costs.

Why it matters: Data security laws are created at both the state and federal levels. Currently, multiple states and federal agencies are setting data security standards with little to no coordination. Navigating this web of laws increases companies’ compliance costs without effectively solving the central concern of consumer safety. A patchwork of state laws and federal regulations confuses businesses, increases cost, and ultimately harms consumers.

What’s next: MBA will keep members informed of any updates.

For more information, please contact Rick Hill at (202) 557- 2718 or Gabriel Acosta at (202) 557 -2811.

NY DFS Finalizes Second Amendment to Cybersecurity Regulation

On November 1, the New York State Department of Financial Services (NY DFS) released a finalized version of its second amended version of their Cybersecurity Regulation (23 NYCRR 500). Previously, MBA and NY MBA submitted a joint comment letter in response to the original proposed amendments. The final version incorporates several parts of past proposals, such as establishing a new tier of covered entity (“Class A Companies”) which are subject to additional reporting requirements.

The amended final rule also further limits access to information systems, requires companies to establish a business continuity and disaster recovery plan, and conduct additional risk and vulnerability assessments.

NY DFS is offering training to help regulated entities plan for compliance. A link to the webinar schedule can be found here.

Why it matters: New York is the state with the most extensive cybersecurity requirements that companies will need to comply with, and this rule could potentially serve as a model for other states to follow.

What’s next: Covered entities have 180 days from the effective date to comply. Changes to reporting requirements take effect one month after publication of the amended regulation, or December 1, 2023. Other key compliance dates can be found here.

For more information, please contact Rick Hill at (202) 557- 2718 or Gabriel Acosta at (202) 557 -2811.

Senate Banking Committee Holds Hearing on Financial Protections for Veterans

The Senate Banking Committee recently held a hearing titled “Ensuring Financial Protection for Servicemembers, Veterans, and Their Families.” A summary of the hearing can be found here.

Why it matters: During the hearing Senator J.D. Vance (R-OH) questioned the hearing witnesses about the potential need to take further steps to protect eligible VA Home Loan borrowers from attempts to repeatedly refinance their existing loans. Vance also signaled his intent to introduce legislation to achieve this objective.

What’s next: MBA is engaging with Senators (on both sides of the political aisle) on the Vance draft bill – and to share how our industry has complied with the requirements of The Protecting Veterans from Predatory Lending Act of 2018 that provides meaningful refinancing protections.

For more information, please contact Ethan Saxon at (202) 557-2913 or George Rogers at (202) 557-2797.

MBA, IMBA Raise Significant Concerns Regarding Revised Illinois CRA Rules

Last Tuesday, the Illinois Legislature’s Joint Committee on Administrative Rules (JCAR) held a hearing to review the Department of Financial and Professional Regulations (IDFPR) second notice of proposed rules for the state’s Community Reinvestment Act (CRA).

During the hearing, legislators asked questions focused on a newly proposed and concerning disparity study, with respect to the timing of its implementation and the need for independence in its conduct.

Most importantly, committee members were very focused on how findings from the study could affect CRA exam criteria without JCAR review ( i.e. outside of the formal rule making process).

Go deeper: Ahead of the hearing, MBA and the Illinois Mortgage Bankers Association (IMBA), submitted comments that not only reiterated concerns expressed in recent meetings with IDFPR and JCAR staff, but also responded to new issues based on those discussions.

The letter strongly objected to the clear change in regulatory direction by IDFPR, which has diverged from the language of the enacted Illinois CRA statute, statements by regulators throughout the process, and the proposed rules released for comment in December 2022.

Among other concerns is the rejection of MBA’s suggestion to rely on Home Mortgage Disclosure Act (HMDA) data as the independent objective metric for establishing annual examination priorities for IMBs.

The revised rules would also establish an unnecessarily narrow approach by counting only the origination and then initial sale of a mortgage loan as eligible for CRA credit. The revised language also proposes to hold lenders accountable for decisions made by independent appraisers.

What’s next: IDFPR must obtain JCAR approval to proceed with rulemaking at its next meeting on December 12, 2023. MBA and IMBA will continue to collaborate and push for changes in these proposed rules ahead of the hearing.

For more information, including MBA’s previous comment letters on the rule, please visit MBA’s State CRA resource page or contact William Kooper (202) 557-2727 or Liz Facemire (202) 557-2870.

NMLS MCR Version 6 Implementation Update; MBA, CSBS to Host Webinar on November 21st

Last Monday, the Conference of State Bank Supervisors (CSBS) held its first “office hours” to answer implementation questions for the NMLS Mortgage Call Report Version 6 (MCRV6) that goes into effect on January 1, 2024. The calls are important opportunities to get the answers needed ahead of the implementation, especially considering the short lead time.

Go deeper: Over MBA’s objections, regulators have insisted on keeping this very tight timeline for changing over to V6MCR. These “office hours” and other public information efforts are in response to MBA’s call for significantly improved sources of information about the changes and to discuss any challenges faced in the coming weeks.

The questions asked during the office hours will feed the Frequently Asked Questions (FAQs) document to be posted on the MCRV6 Resource Page. Members should also note that there is a new dedicated email address specifically for MCRV6 questions (MCRV6@CSBS.Org).

The next “office hours” opportunity is Monday November 20th from 1 – 2 p.m. ET, and they will continue every other Monday at that time through April 1, 2024.

Why it matters: MBA urges members to participate in these meetings to provide more visibility into the complications industry faces in this swift implementation. To join the meeting (all sessions), use the following link, meeting ID and passcode:


Meeting ID: 821 0299 5323

Passcode: 102696

What’s next: MBA will hold a free member webinar with CSBS staff on Tuesday, November 21, 2023, at 1 pm ET. Click here to register.

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 single-family and commercial/multifamily programming that covers the spectrum of challenges, obstacles and solutions pertaining to our industry. Below, please see a list of upcoming and recent webinars – which are complimentary to MBA members:

Adopting Best Practices for Prefunding QA and Post-Close QC – November 14

NMLS Mortgage Call Report (MCR) Version 6 – What You Need to Know – November 21

Community Reinvestment Act: Final Regulations and What Banks Need to Know Now – November 28

Originating and Succeeding with High-Net-Worth Borrowers – November 29

Ten Things Your Company Must Do in 2024 – December 12

MBA members can register for any of the above events and view recent webinar recordings by clicking here.

For more information, please contact David Upbin or (202) 557-2931.