MBA Advocacy Update Oct. 23: Federal Banking Agencies Extend Comment Period on Basel III Bank Capital Proposal

1. Federal Banking Agencies Extend Comment Period on Basel III Bank Capital Proposal; Fed to Conduct Impact Analysis

On Friday, federal bank regulatory agencies announced that they will extend until January 16, 2024, the comment period on their so-called, “end game” proposed rules to complete U.S. regulators’ implementation of the Basel III standards. In addition, the Federal Reserve Board announced it will collect data from covered banks in order to conduct an impact analysis of the rule.

Why it matters: MBA strongly opposes certain provisions of the Basel III bank capital proposal that would undermine mortgage credit availability and has explained with lawmakers on Capitol Hill, regulators, and in the media about how the proposed rule could affect the economy, single-family housing market, and commercial real estate finance markets. MBA has also called out the lack of any rigorous impact analysis in the proposed rule.

Zoom in: In September, MBA President and CEO Bob Broeksmit, CMB, testified before the House Financial Services Subcommittee on Financial Institutions and Monetary Policy, outlining our concerns and how the proposal undermines several current policy objectives of the Biden Administration, including efforts to close the racial homeownership and wealth gaps, the provision of affordable housing (both ownership and rental), the promotion of competition over consolidation, and next week’s likely unveiling of a final Community Reinvestment Act rule.

What’s next: MBA believes that stakeholders should have the opportunity to comment on the impact assessment – and again on the rule – once the report is released. MBA created a summary of the proposed rule and is working with members and other industry stakeholders to formulate its response, with a focus on outlining the numerous negative impacts it would have on the housing finance ecosystem.

For more information, please contact Pete Mills at (202) 557-2878, Bill Killmer at (202) 557-2736 or Fran Mordi at (202) 557-2860.

2. Director Thompson Announces Expanded Relief for COVID-19 Forbearance Loans; Addresses GSE Repurchases Issue

During remarks on Monday at MBA’s 2023 Annual Convention and Expo, Federal Housing Finance Agency (FHFA) Director Sandra Thompson announced that FHFA will revise the treatment of active single-family loans backed by Fannie Mae and Freddie Mac (the GSEs) for which borrowers elected a COVID-19 forbearance under the GSEs’ representations and warranties (rep and warrant) framework. Under the updated rep and warrant policies, loans will remain eligible for the GSEs’ 36-month timely payment relief even if the borrower missed payments pursuant to a COVID-19 forbearance plan. The new policy treats these loans similar to loans affected by a natural disaster and is responsive to MBA’s advocacy dating back to the early days of the pandemic.

Director Thompson also stated that the GSEs will be working to revise language in their selling guides to improve clarity and provide more consistent feedback to lenders when a repurchase request is made. She also noted that FHFA remains committed to ensuring that alternatives to repurchases are available and offered on a regular basis – including the consideration of initiatives to test and learn from various options for performing loans with defects.

Why it matters: In a press statement sent after Director Thompson’s remarks, MBA’s Broeksmit said, “MBA has advocated strongly for FHFA to address the GSEs’ increased incidence of loan repurchase requests – especially for performing loans and those with relatively minor issues underwritten during the pandemic. We share FHFA and the GSEs’ goal of high-quality underwriting and will continue to work with them to ensure the rep and warranty framework is being applied in a balanced way, and that there are appropriate alternatives that lead to outcomes short of a repurchase request. FHFA’s policy change to provide rep and warrant relief for performing seasoned loans that have successfully exited COVID-19 forbearance plans is a longstanding recommendation that we are pleased to see implemented.”

What’s next: The updated framework will go into effect beginning October 31, 2023. MBA will continue to call on FHFA and the GSEs to improve the quality control and repurchase process to ensure the rep and warranty framework is being applied in a fair and balanced way.

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

3. FHFA Releases Appraisal-Level Data Sample from the Uniform Appraisal Dataset

Last Monday, FHFA announced the release of the Universal Appraisal Dataset (UAD) Appraisal-Level Public Use File (PUF) at MBA’s 2023 Annual Convention and Expo. The expanded release contains data from a 5 percent random sample of the UAD, which FHFA describes as “nationally representative.” MBA has long advocated for a careful release of additional data from the UAD, as it would be beneficial to multiple aspects of appraisal policy and technology development, including enhanced accuracy, the promotion of alternative appraisal methods, and the identification of potential racial bias.

Why it matters: MBA supports FHFA’s ongoing work on data transparency regarding appraisals. In a press statement shortly after the announcement, MBA’s Broeksmit said “the release of appraisal-level records will improve appraisal accuracy while ensuring consumer privacy and safety and soundness.”

What’s next: MBA will continue to continue to urge FHFA to release additional data – with appropriate privacy protections – to improve valuation accuracy and speed, and lower costs.

For more information, and to provide feedback on this announcement, please contact Hanna Pitz at (202) 557-2796.

4. FHFA to Host Property Insurance Symposium Series

Last Monday, the FHFA announced at MBA’s 2023 Annual Convention and Expo that it will host a series of property insurance symposiums starting in November 2023. These sessions will give FHFA the opportunity to engage with the industry on the availability and affordability of property insurance. The first symposium will take place on November 14 and 15, 2023, and will focus on how to address the insurance needs of the market.

Why it matters: 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.

What’s next: MBA will participate in these forums and share all relevant information with members.

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

5. FHA Releases Mortgage Letter on Allowing ADU Rental Income in Borrower Underwriting

Last week, the Federal Housing Administration (FHA) released Mortgagee Letter 2023-17 (ML), which includes revisions to the guidelines for insuring mortgages on single-family homes featuring Accessory Dwelling Units (ADUs). The updated ML – announced at MBA’s Annual Convention and Expo – now permits the consideration of rental income from an ADU as eligible income during the evaluation of borrowers for both forward and reverse mortgages. Additionally, the ML introduces modifications to the FHA’s 203(k) Rehabilitation Mortgage Insurance Program (FHA 203(k) Program) to facilitate the financing of attached ADU construction as part of the program.

Why it matters: MBA has advocated for comprehensive updates to FHA’s 203(k) program, including the ability to finance ADUs within the program. While the ML allows for attached ADUs, it stops short of allowing detached ADUs, which is crucial when considering converting spaces above detached garages or in barns in rural areas.

What’s next: MBA’s 2024 Chairman Mark Jones has made housing supply a signature advocacy priority for MBA, including comprehensive updates to FHA 203(k) and other renovation programs.

For more information, please contact Darnell Peterson at (202) 557-2779

6. Senate Banking Subcommittee Holds Hearing on CDFIs

Last week, the Senate Banking Committee’s Subcommittee on Housing, Transportation, and Community Development held a hearing titled, “How Community Development Financial Institutions (CDFIs) Promote Housing and Economic Opportunities.” A summary of the hearing can be found here.

Why it matters: There was bipartisan agreement during the hearing that CDFIs are an important part of addressing the capital and housing needs of rural, low-income, and native communities.

What’s next: The potential for consideration of legislation that supports CDFIs exists. For example, Subcommittee Chair Tina Smith (D-MN) promoted the potential benefits of bipartisan legislation designed to reauthorize the existing federal CDFI Bond Guarantee Program.

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

7. State Regulators Announce NMLS MCR Version 6 Will Proceed as Planned in First-Quarter 2024

The Conference of State Bank Supervisors (CSBS) recently emailed all licensees to notify them that the Nationwide Mortgage Licensing System (NMLS) intends to proceed with its planned implementation of Version 6 of the Mortgage Call Report (V6MCR) at the beginning of 2024. MBA strongly objected to the V6MCR implementation date in a July letter to CSBS, in staff meetings during the summer, and during the September NMLS Ombudsman meeting. The V6MCR will collect new and revised data fields, and significantly expand reporting requirements for smaller MCR filers. MBA has objected to the timeline because they did not provide the necessary technical specifications ( XML file) needed for implementation. MBA has also sought a new public comment period (given the five years that has elapsed since V6MCR was initially released stakeholder input), MCR alignment with the Mortgage Banker Financial Reporting Form (MBFRF), and a longer implementation period of at least 18 months. These recommendations were rejected by the state regulators on the MCR Subcommittee, the NMLS Policy Committee, and the State Regulatory Registry’s Board of Managers.

Why it matters: Lenders must prepare for these new data collection requirements that become effective on January 1, 2024. MBA recommends lenders contact their vendors and begin any possible system changes that are necessary for your 2024 Q1 MCR report.

What’s next: CSBS noted that they share more information and opportunities to engage with staff to help answer your questions. Some materials have already been updated directly to the MCR resource page. Each member company may also convey their questions and concerns directly to CSBS via a new dedicated email address ( MCRV6@csbs.org), and to their state regulators. MBA remains committed to representing its members’ needs in this matter and urges CSBS to take steps to mitigate the costs and compliance risks.

For more information, please contact William Kooper (202) 557-2737 or Liz Facemire (202) 557-2870.

8. 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:

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

Avoiding TCPA Class Actions and Do Not Call Complaints – November 9

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

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.