MBA Advocacy Update Oct. 9: Broeksmit Discusses What the Federal Reserve Can Do to Reduce Rate Volatility
- MBA President and CEO Bob Broeksmit: What the Federal Reserve Can Do to Reduce Rate Volatility
MBA President and CEO Bob Broeksmit, CMB, penned a letter to MBA members last week that addressed how the Federal Reserve’s monetary policy actions (e.g., rate hikes and quantitative tightening), as well as fiscal policy and political dysfunction, have bloated the 10-Year Treasury vs. 30-year fixed-rate mortgage spread, leading to a jump in mortgage rates and a significant cooldown in borrower demand.
Broeksmit acknowledged that while the Fed will not intervene to support a segment of the housing finance market – absent risk to the entire financial system (e.g., the early months of the pandemic) – it is very important for the Fed to make two clear statements: 1) the Fed is at the end of its rate hikes, and 2) it will not consider selling its MBS holdings until and unless the housing finance market has stabilized and mortgage-to-Treasury spreads have normalized. Broeksmit also stressed the need for the Fed to do this during a live CNBC interview on Wednesday.
• Why it matters: MBA recognizes how severely current market conditions are straining the housing finance market and member companies. We are regularly engaged with senior leadership at the Fed and will continue to share real-time market color on both residential and commercial lending. It is also important to understand that Fed policy alone is not responsible for the recent rate instability. Fiscal policy and political dysfunction have also played a role, and Congress must take steps to restore budget discipline and effective policymaking. Ongoing gridlock on Capitol Hill, including a “near miss” government shutdown last week, continues to be a concern for financial markets, further driving up the price of government debt.
• What’s next: MBA – along with other housing trade associations – will be asking the Fed in the coming days to communicate its plans. MBA will also continue to advocate on members’ behalf with regulators, policymakers on both sides of the aisle, the GSEs, and the Fed.
For more information, please contact Pete Mills at (202) 557-2878 or Bill Killmer at (202) 557-2736.
- Supreme Court Hears Oral Arguments in CFSA v. CFPB
Last Tuesday, the Supreme Court held oral arguments for Community Financial Services Association of America (CFSA) v. Consumer Financial Protection Bureau (the CFPB). The Court heard arguments as to whether the CFPB’s funding mechanism violates the Appropriations Clause and, if so, the appropriate remedy for this violation. A transcript of the oral argument can be found here.
The government argued that the CFPB’s ability to draw its funds from the Federal Reserve rather than receiving funds through annual appropriations is allowable under the Appropriations Clause. The government pointed to historical analogues, including the Federal Reserve, to show that Congress can provide standing appropriations with significant discretion to agencies. CFSA argued that the CFPB’s funding structure violated the Appropriations Clause because it is a standing appropriation that is doubly insulated from the traditional appropriations process and also violated separation of powers principles. CFSA rejected the notion that the cap on CFPB funding is important to this analysis because the CFPB has not requested an amount close to this cap. The government brought up MBA’s amicus brief during a discussion about the remedy requested by CFSA, and pointed to the arguments made in the brief as illustrating the consequences of eliminating the CFPB entirely and as a reason to provide at most a narrow prospective remedy.
• Why it matters: Should the funding structure be struck down, the rules MBA members rely on to comply with the Dodd-Frank statute – including important safe harbors like the Qualified Mortgage – could also fall, exposing lenders and servicers to major compliance and legal risks.
• What’s next: The Court is expected to release a ruling by July of next year. MBA will keep members informed of any updates.
For more information, please contact Justin Wiseman at (202) 557-2858 or Alisha Sears at (202) 557-2930.
- MBA Supports FHA Proposal to Eliminate Face-to-Face Requirements; Offers Recommendations for Improvement
MBA recently led an industry trade coalition in a letter of support of the Department of Housing and Urban Development’s proposal to modernize mortgage servicers’ engagement with borrowers in default on a Federal Housing Administration-insured mortgage. Under HUD’s proposal, mortgage servicers are no longer required to meet with borrowers in-person or face-to-face. Instead, HUD is proposing to provide servicers with the flexibility to contact borrowers through electronic or remote technology, such as virtual calls.
To implement HUD’s proposal successfully, the letter recommended that FHA: 1) expressly state that servicers are not required to offer in-person meetings to borrowers; 2) clearly permit electronic or remote means of communication through compliance with FHA’s existing early intervention standard; and 3) utilize the Single-Family Drafting Table to receive comments before finalizing the policy. MBA also recommended that FHA extend the partial face-to-face waiver – which expires at the end of the year – if they cannot complete the new policy before year end.
• Why it matters: Eliminating the face-to-face requirement has been a top priority for MBA to reduce regulatory burdens and costs on servicers of nonperforming FHA loans. However, the proposed rule also expands the requirement for servicers to meet with all borrowers in default by eliminating two key exemptions for borrowers 200 miles outside a branch office or non-owner-occupants. Implementing the letter’s recommendations includes accepting servicers current outreach efforts to establish contact with a borrower as a reasonable effort to meet with (or “engage” as we recommended) a borrower.
• What’s next: MBA will continue to monitor and communicate developments through the Loan Administration Committee once a final rule is published.
For more information, please contact Brendan Kelleher at (202) 557-2779.
- California Enacts Remote Online Notarization
California Governor Gavin Newsom recently signed MBA-supported remote online notarization (RON) legislation (SB 696). California is now the 45th state to enact RON for use in real estate finance transactions. This approval represents the result of sustained and coordinated industry advocacy involving MBA, the California MBA, member companies, and sister trade associations. The enacted version delays California-commissioned notaries’ ability to perform RON until at least 2030, unless the Secretary of State office can implement commissions sooner. However, the bill retains language providing recognition of out-of-state RON notarizations and removes overly burdensome reporting requirements that had been in earlier versions of the bill.
• Why it matters: California is the industry’s largest origination state, and the ability to perform RON transactions will provide more opportunity for notaries while increasing availability and flexibility of notary services for mortgage closings.
• What’s next: MBA expects to work with the CMBA to expedite implementation ahead of the 2030 effective date and will continue to work with all stakeholders to enact RON legislation in the remaining states – Alabama, Georgia, Mississippi, and South Carolina – as well as fix Connecticut’s real estate prohibition of RON use.
For more information, please visit www.mba.org/RON or contact William Kooper at (202) 557-2737 or Liz Facemire at (202) 557-2870.
- Illinois Releases Revised Rules to Implement State Community Reinvestment Act; MBA to Meet with Regulator
The Illinois Department of Financial and Professional Regulation (IDFPR) recently made public a revised set of Community Reinvestment Act (CRA) regulations as well as summaries of changes and responses to comments IDFPR has received. The release of these documents is a component of a state-required process to provide the information to the Illinois Joint Committee on Administrative Rules (JCAR) for review. The documents are available on MBA’s state CRA webpage resource center. This is the next step for IDFPR to implement the 2021 statute mandating CRA for state charted banks, credit unions, and independent mortgage banks (IMBs). JCAR is currently scheduled to conduct its review on October 17th. MBA and the Illinois MBA submitted robust comments on the proposed rules earlier this year.
• Why it matters: MBA has significant concerns with the revised rules. For example, IDFPR’s is seeking to make changes to its previously proposed examination procedures and metrics by placing greater reliance on metrics not specified in statute. The revisions also seek to hold lenders accountable for any bias of independent appraisers. Lastly, without a notice and comment period, IDFPR is now seeking to conduct a “disparity study” delegated to a private “pro bono” entity that would identify future changes to examination criteria and metrics. The Department has provided few details on how the study will be conducted, whether this will be a public process, nor how any suggestions would be incorporated into future exams.
• What’s next: MBA is scheduled to meet with IDFPR staff in the coming weeks and will also seek to meet with JCAR committee members and staff.
For more information, please visit www.mba.org/StateCRA or contact William Kooper at (202) 557-2737 or Liz Facemire at (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:
• Private Credit Finance 101: A Commercial/Multifamily Overview of Debt Funds and Their Importance in the Capital Stack – October 12
• Using Data Analysis as Part of a Strong Fair Lending Compliance Program – October 24
• Strategies for Serving Millennial and Gen Z Homebuyers – November 2
• CREF Career Conversations – November 9
• 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.
For more information, please contact David Upbin at (202) 557-2931.
