MBA Advocacy Update: Basel III Letter Calls for Changes to Mortgage Provisions; Congress Passes Another CR to Avoid a Government Shutdown; MBA Supports Bipartisan Tax Package

January 19, 2024

MBA mourns the passing of former President and CEO David H. Stevens, CMB. Read the announcement here.

MBA Submits Comments on Basel III Endgame Proposal; Urges for Key Changes to Mortgage Provisions

On Tuesday, MBA submitted comments in response to proposed changes issued by the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) for capital requirements for banks with assets of $100 billion or more.

MBA specifically recommended the following changes to the overall U.S. bank capital framework that would improve mortgage market participation, liquidity, and resilience, and help ensure the continued flow of mortgage credit while reducing costs for consumers:

Single-Family Residential Mortgage Risk Weights: adopt the Basel III recommended risk weights by LTV and remove the 20 percentage point add-on (“gold plating”); and provide credit for private mortgage insurance (PMI) on high loan-to-value (LTV) loans held on a bank’s balance sheet;

Mortgage Servicing Rights: retain the current 25 percent cap on MSRs that can be reflected in regulatory capital for category 3 and 4 banks; and lower the current punitive 250 percent risk weight assigned to MSRs for all banks;

Warehouse Lending: preserve the current credit conversion factor on any unused portion of a warehouse line and reduce the current 100 percent risk weighting on warehouse lines; and

Commercial Lending: refrain from including an expanded definition of defaulted real estate exposures or define “obligor” to mean only the legal owner of the real estate

Go deeper: Last September, MBA President and CEO Bob Broeksmit, CMB, testified before the House Financial Services Subcommittee on Financial Institutions and Monetary Policy, outlining MBA’s 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 the final Community Reinvestment Act rule.

These arguments and others were made in MBA’s comment letter and in other coalition letters it signed, including with other housing trades, commercial real estate trades, and reinsurance groups.

Why it matters: MBA’s letter emphasized that certain provisions of the proposed rule would impact the entire mortgage market, not just the covered banks. Moreover, the proposed rule was adopted with scant analysis of the impact on the broader economy or on specific key sectors like housing.

What’s next: MBA will continue to engage with the banking agencies in support of our recommendations. Last week, MBA met with FDIC officials to amplify the concerns outlined in our letter, and will be meeting with other banking agency staff next month. In addition, the banking agencies are expected to publish the results of a quantitative impact analysis – which should have preceded the proposal. MBA will review and provide further comments and analysis on the QIS. Final rules are not expected until late 2024 at the earliest.

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

Congress (Once Again) Votes to Extend Funding for the Federal Government

The U.S. House and Senate yesterday again passed a two-tiered Continuing Resolution (CR) that averts a government shutdown and extends Fiscal Year 2024 funding for the federal government. President Biden is expected to sign the bill into law quickly, ensuring that all the various government-supported segments of the mortgage market, including the Department of Housing and Urban Development (HUD) (Ginnie Mae and FHA included), USDA, and the VA continue to operate uninterrupted.

The bill also includes temporary extensions for several programs, including the National Flood Insurance Program (NFIP), which is extended through March 8, 2024.

The bill extends funding of the following Appropriations bills through March 1, 2024:
Transportation, Housing and Urban Development, and Related Agencies
Agriculture, Rural Development, Food and Drug Administration, and Related Agencies
Energy and Water Development
Military Construction, Veterans Affairs, and Related Agencies

Funding of the remaining spending bills are extended through March 8, 2024:
Commerce, Justice, Science, and Related Agencies
Defense
Financial Services and General Government
Homeland Security
Interior, Environment, and Related Agencies
Labor, Health and Human Services, Education, and Related Agencies
Legislative Branch
State, Foreign Operations, and Related Programs

What’s next: Congress still needs to reach an agreement on federal funding for the remainder of Fiscal Year 2024. MBA will remain directly engaged in all the conversations around government funding and the NFIP ahead of the first deadline on March 1, 2024.

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

House Ways and Means Committee Introduces and Holds Mark-up on Tax Extender Package

Last Wednesday night, the House Ways and Means Committee, led by Chairman Jason Smith (R-MO), released text of H.R. 7024, the “Tax Relief for American Families and Workers Act of 2024.” The tax package negotiated by Chairman Smith and Senate Finance Committee Chairman Ron Wyden (D-OR) was marked up Friday in the House Ways and Means Committee. A summary of the bill is here. MBA’s letter regarding H.R. 7024 can be found here. A broad coalition letter that MBA joined in support of the bill’s housing provisions can be found here.

What they’re saying: In a press statement ahead of the markup, President and CEO Broeksmit said, “MBA and its members have long called for enacting tax provisions that address our nation’s housing affordability crisis and the acute shortage of homes for owning and renting. We support this bill, particularly for its meaningful enhancements to the Low-Income Housing Tax Credit (LIHTC) that will produce an estimated 200,000 additional rental units over the next two years.”

Why it matters: H.R. 7024 restores a LIHTC ceiling increase from 9 percent to 12.5 percent for calendar years 2023 through 2025, thereby allowing states to allocate more credits for affordable housing projects, and temporarily lowers the Private Activity Bond (PAB) threshold test from 50 percent to 30 percent for 4 Percent LIHTC property projects with an issue date before 2026. The changes, if enacted, are estimated to help produce an additional 200,000 rental units nationwide over the next two years.

What’s next: The markup of H.R. 7024 is the first step in the debate over the Smith/Wyden package that will involve the House, Senate, and the Biden administration in the coming weeks.

MBA will continue working with lawmakers on both sides of the aisle during this ongoing tax discussion to seek action on the LIHTC provisions as quickly as possible, while continuing to push for other tax changes that can help stem the housing supply and affordability crisis.

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

Ginnie Mae Explores New HECM Mortgage-Backed Security Product

On Tuesday, Ginnie Mae announced its intention to explore the development of a new securitization product to enhance the viability of the Home Equity Conversion Mortgage (HECM) mortgage-backed securities (HMBS) program.

The new product would potentially help to ease ongoing liquidity constraints by enabling the securitization of HECM loans with balances above 98% of the Federal Housing Administration’s (FHA) Maximum Claim Amount (MCA). It would not change the requirements for the existing HMBS program, where HECM loans with balances at or above 98% MCA are required to be bought out of HMBS.

Why it matters: This announcement follows the collective advocacy of the MBA and the National Reverse Mortgage Lenders Association (NRMLA) over the last several months in response to the liquidity challenges that have plagued the reverse mortgage industry, stemming from the late-2022 bankruptcy of large reverse mortgage lenders. Should Ginnie Mae decide to move forward with this product, it would provide HMBS issuers with liquidity to finance the buyouts out of the current program.

What’s next: MBA will remain engaged with Ginnie Mae and will solicit necessary feedback from HECM-originating members.

For more information, please contact John McMullen at (202) 557-2706.

Illinois Re-Proposes State’s Community Reinvestment Act Rules

The Illinois Department of Financial and Professional Regulation (IDFPR) recently re-proposed rules to implement the state’s Community Reinvestment Act (CRA) for IMBs (pages 7-80 of the document), community banks (pages 81-144) and credit unions (pages 151-184). The new rules no longer contain the MBA-opposed Disparity Study, which was also criticized by the Legislature’s Joint Committee on Administrative Rules (JCAR) during recent public hearings.

Go deeper: At a December hearing, JCAR directed IDFPR to continue stakeholder discussions, make appropriate changes to address concerns, and revise and re-propose the regulations. However, the re-proposal still retains the problematic elements outlined in MBA and Illinois MBA’s joint comment letter, including the misconception of “loan churning” and holding lenders accountable for appraisal bias.

Why it matters: Since 2021, MBA and the Illinois MBA have together voiced numerous issues and urged IDFPR to align the rules with those of Massachusetts, which is the only state with an existing CRA framework for IMBs. This re-proposal is a positive development stemming from these years of coordinated advocacy.

What’s next: Comments on the rules are due by February 25, 2024, but will first be subject to a further JCAR hearing, perhaps as soon as February 6. MBA and the Illinois MBA will again collaborate in presenting the industry views and urge continuity with existing CRA requirements, including the finalized version of the Federal CRA regulations.

For more information please visit MBA’s State CRA resource page or contact William Kooper (202) 557-2737 or Liz Facemire (202) 557-2870.

mPower Moments: Serving Diverse Communities with CNB’s Dr. Vanessa Montañez

mPower Founder Marcia M. Davies sits down with Dr. Vanessa Montañez, Senior Vice President and Community Lending National Manager at City National Bank, for an in-depth interview on Vanessa’s illustrious career and how she was able to ascend to her current role at CNB.

Go deeper: She also shares the various roles she has held in the real estate finance industry and how her passion for serving diverse communities led her to new opportunities within the industry. Furthermore, Vanessa discusses her decision to obtain her doctorate and how it has benefitted her career and helped her gain new leadership skills.

For more information, please contact Marcia Davies at (202) 557-2707.

REGISTER: MBA’s National Advocacy Conference on March 19-20

Join us in Washington, D.C. to meet with key policymakers, network with colleagues across the industry and hear from policy experts on the topline issues impacting the industry. An exclusive reception will be held on Tuesday, March 19, at the National Museum of Women in the Arts. Lend your voice to our efforts and bring your expertise and experiences to the table.

Why it matters: Your participation at NAC ensures that members of the 118th Congress and the administration understand how proposed legislation affects your employees, your end users, and the communities you (and they) serve.

What’s next: MBA will continue to advocate for issues impacting the real estate finance industry.

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:

Cybersecurity Risks, Recovery & Regulatory Requirements – January 25

C-PACE for New Development, Refinance, Renovation, and Rescue – January 30

Transforming Lending Operations: How to Leverage Intelligent Automation – January 30

Revisiting Your Servicing Retained Versus Released Decision – February 15

Private Credit Finance 201: A Deep Dive into Debt Funds and Their Impact to Commercial Real Estate Lending – March 6

Builder’s Risk Insurance: Analysis & Perspectives – March 20

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

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