MBA Advocacy Update Nov. 6: FSOC Finalizes Interpretive Guidance and Analytical Framework on Nonbank SIFI Designation; HFSC Hearings on Flood
Friday afternoon, 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 a market participant 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 Analytic 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 IMB servicers.
Why it matters: Under the new guidance, nonbank financial companies are more vulnerable to the prospect of FSOC designation and the resulting enhanced prudential supervision by the Federal Reserve.
What they are saying: In a blog post last week, MBA President and CEO Bob Broeksmit, CMB, called FSOC’s moves 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.
Broeksmit highlighted the fact that the non-bank mortgage servicing sector is already heavily regulated by Ginnie Mae and the Federal Housing Finance Agency (FHFA), and that no individual company comprises more than a small fraction (less than 7%) of the market for servicing outstanding single-family mortgage debt.
Prior to Friday’s vote, MBA repeatedly stressed its concerns that an FSOC designation process that lacks due process and analytical rigor potentially compromises the integrity of the entire designation process.
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: MBA will publish a summary brief of the Interpretive Guidance and Analytic Framework in the coming days. 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, stressing that the prospect of designating an IMB servicer will only mean higher costs, burdening prospective homebuyers with higher prices and less choice at a time of constrained housing affordability.
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.
Federal Reserve Maintains Federal Funds Rate
The Federal Reserve, in its ongoing efforts to slow inflation, decided to hold the federal funds rate to a target range of 5.25-5.50% on Wednesday.
Why it matters: The FOMC emphasized that, “the Committee will continue to assess additional information and its implications for monetary policy,” and that it “will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans.”
Go deeper: During the Fed’s press conference, Chair Jerome Powell was asked about the banking industry’s strong pushback of several aspects of the Basel III endgame capital proposal.
Chair Powell said that the Fed expects a lot of comments and will take them seriously. “I’ll say, what I do expect is that we will—we will come to a—we’re a consensus-driven organization. We’ll come to a package that has broad support on the Board.”
What they’re saying: MBA’s SVP and Chief Economist Mike Fratantoni noted, “Even though third-quarter economic growth came in quite strong, and several job market indicators continue to show strength, so long as inflation continues to come down, the Fed is likely to pause at this level for some time. We expect its next move will be a cut in next year’s second quarter.”
What’s next: MBA will submit comments on the banking agencies’ Basel III bank capital proposal, which will include recommendations on substantial changes to key mortgage-related provisions in the NPR. Comments are due by January 16, 2024,
For more information, please contact Mike Fratantoni at (202) 557-2935 or Fran Mordi at (202) 557-2860.
Missouri Jury Finds Realtors Guilty of Inflating Commissions
Last Tuesday, a Kansas City jury found that the National Association of Realtors (NAR), HomeServices of America, and Keller Williams Realty colluded to inflate or maintain high commission rates using the Broker Buyer Commission Rule (the Rule).
Go deeper: The defendants have been ordered to pay $1.78 billion in damages. However, the judge in this case has yet to issue a final judgment, which should be released in the next few days.
Damages could be tripled, possibly ending up being more than $5 billion. Furthermore, injunctive relief could be issued, which could mean a change to, or elimination of, the Rule that requires listing agents to offer compensation to buyers’ agents as a condition of listing a property on the Multiple Listing Service.
MBA’s August 2023 summary of the real estate compensation lawsuits can be found here.
Why it matters: Depending on the injunctive relief ordered and the expected appeal by NAR, the immediate impact on the home sales process and the mortgage industry is unclear. However, while the judicial process plays out, the market can be expected to develop new approaches to the negotiation and payment of buyer agent commissions. MBA has initiated discussions with the GSEs, the Federal Housing Administration, and Department of Veterans Affairs to raise awareness about possible guideline changes that may be needed to accommodate new arrangements.
What’s next: With NAR stating that it plans to appeal the decision, this process could take years to resolve. MBA will continue to monitor this case and others that potentially could impact how real estate agents are compensated – transforming home buying and ultimately home financing.
For more information, please contact Justin Wiseman at (202) 557-2854 or Alisha Sears at (202) 557-2930.
House Financial Services Subcommittee Holds Hearing on Insurance Costs, Availability
On Thursday, the House Financial Services Subcommittee on Housing and Insurance held a hearing titled, “Factors Influencing the High Cost of Insurance for Consumers.” Hearing topics included the overall high cost of insurance, current challenges in individual state markets, and the impact of federal and international regulatory developments. A summary of the hearing can be found here.
Go deeper: Insurance premiums have risen for 20 straight quarters due to increased risk from natural disasters. Finding adequate insurance coverage is increasingly difficult and has affected homeowners, commercial owner/operators, and lenders.
Why it matters: MBA submitted a statement for the record ahead of the hearing on top industry priorities, including reauthorizing the National Flood Insurance Program (NFIP) – set to expire on November 17, 2023 – addressing the rising costs and declining availability of private property insurance coverage, and needed reforms to the Federal Housing Administration (FHA)-insured Multifamily Program.
What’s next: FHFA will host a series of property insurance symposiums in the coming weeks on the availability and affordability of property insurance and how to address the insurance needs of the market.
MBA will work with the Administration and members of Congress on both sides of the aisle to stress the importance of avoiding a lapse in the NFIP program while emphasizing the need for a long-term authorization to protect residential and commercial real estate markets and provide stability for the companies and agents that sell and administer the NFIP.
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.
House Financial Services Subcommittee Targets SEC Rulemakings
The House Financial Services Subcommittee on Capital Markets held a hearing last week titled, “Examining the SEC’s Agenda: Unintended Consequences for U.S. Capital Markets and Investors.” The hearing served as a follow-up to the subcommittee’s September hearing with Chair Gary Gensler.
Go deeper: The hearing delved into the SEC’s approach to rulemaking, which has sparked bipartisan concerns, including the rapid push to propose and finalize numerous new rules, providing insufficient comment periods, and pushing the bounds of the SEC’s statutory authority. A summary of the hearing can be found here.
Why it matters: Ahead of the hearing, Reps. Wiley Nickel (D-NC) and Bryan Steil (R-WI) led a broad bipartisan letter to Chair Gensler urging the SEC to narrow the scope of its proposed rule to Prohibit Conflicts of Interest in Certain Securitizations. The letter outlined industry concerns about the impact the rule could have on the functioning of securities markets and, by extension, the cost of credit for American consumers.
What’s next: MBA will continue its engagement with Congress and the SEC and monitor developments on relevant rulemakings. MBA may also connect with other trade groups to submit subsequent follow-up letters on industry concerns.
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.
Senate Votes on FY 2024 HUD Funding
Last Wednesday, the Senate voted 82-15 on an appropriations package that included funding Transportation, Housing and Urban Development, and Related Agencies (T-HUD) for Fiscal Year 2024 (FY24). The bipartisan Senate bill provides $70 billion in total funding for HUD including $900 million in new commitment authority for Ginnie Mae and $54 million for Ginnie Mae salary and expenses. It also includes $100 million for the “Yes In My Back Yard” grant program to encourage zoning reforms.
The House is considering its FY24 funding bills separately, including its T-HUD measure next week.
Why it matters: Floor action in both chambers represents an initial step towards House and Senate negotiations on final FY24 HUD funding levels as part of a broad, potential omnibus spending package to fund all federal agencies.
What’s next: With Congress unlikely to reach agreement on government funding before November 17, 2023, legislators will need to pass another “stop-gap” Continuing Resolution to keep the government operating.
For more information, please contact Ethan Saxon at (202) 557 2913 or Alden Knowlton at (202) 557-2741.
News on NMLS Version 6 MCR; MBA to Hold Webinar with CSBS
The Conference of State Bank Supervisors (CSBS) emailed licensees additional details regarding the biweekly opportunities to ask questions about the implementation of the new Version 6 of the Mortgage Call Report (V6MCR) taking effect on January 1, 2023.
Go deeper: Over MBA’s objections, regulators have insisted on a very tight timeline for changing over to V6MCR but are responding to MBA’s call for significantly improved sources of information about the changes and the opportunity for members to discuss any challenges they may face in the coming weeks.
The V6MCR Resource Page now includes a number of important new documents. Members should also note that there is a new dedicated email address specifically for V6MCR questions (MCRV6@CSBS.Org). For the “office hours,” CSBS staff will be available every other Monday from 1 – 2 p.m. ET starting Monday, November 6, 2023, through April 1, 2024.
Why it matters: CSBS will answer questions during office hours regarding timelines, changed or added report elements, and available support resources. To join the Zoom meeting (all sessions), use the following link and ID and Passcode:
Link: https://us02web.zoom.us/j/82102995323?pwd=dTV6WHdXWjZNUWVsQzVmVmpUdTR2UT09https://us02web.zoom.us/j/82102995323?pwd=dTV6WHdXWjZNUWVsQzVmVmpUdTR2UT09
Meeting ID: 821 0299 5323
Passcode: 102696
What’s next: MBA will hold an all-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.
Register: MAA Legislative Townhall on November 7
On Tuesday, November 7, the Mortgage Action Alliance (MAA) Quarterly Webinar Series continues with its latest townhall event – just 365 days from the 2024 Presidential election. Join MBA’s Legislative Political Affairs team for updates on the current state of play in Washington and how impending legislation and regulatory issues could impact the real estate finance industry. Register today!
Why it matters: MAA is a resource that keeps members updated on important industry issues. This webinar is free for MBA members. MAA members, register for free with promo code MAA2023 at checkout.
What’s next: MBA will continue to advocate for you, your business, and our communities.
One fun thing: Don’t forget to register for MBA’s National Advocacy Conference (NAC), March 19-20, 2024, in Washington. NAC provides attendees the opportunity to meet directly with key policymakers, network with colleagues across the industry, and hear from DC experts regarding topline issues impacting the industry.
For more information, please contact MAA or Rachel Kelley at (202) 557-2816.
FTC Requires Non-Banks to Report Certain Data Breaches
The Federal Trade Commission (FTC) recently released a final rule amending its Safeguards Rule.
Why it matters: The final rule requires non-bank financial institutions to notify the FTC after the discovery of a breach involving at least 500 consumers. Specifically, the notification is required if the customer information was either unencrypted or the encryption key was also accessed. Non-bank financial institutions must notify the FTC no later than 30 days after the discovery of a security breach by a principal or agent.
Additionally, non-bank financial institutions doing business in New York must report covered data breaches to both the FTC and NY Department of Financial Services.
What’s next: The breach notification requirement becomes effective 180 days after the rule is published in the Federal Register. 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.
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:
CREF Career Conversations – November 9
Avoiding TCPA Class Actions and Do Not Call Complaints – November 9
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
Originating and Succeeding with High-Net-Worth Borrowers – November 29
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.
