MBA Advocacy Update: MBA Suggests Improvements to FHA’s 203(k) Renovation Programs; VA Circular on Assumptions Noncompliance and More

MBA Suggests Improvements to FHA’s 203(k) Renovation Programs

MBA submitted comments last week in response to HUD’s proposed Mortgagee Letter implementing amendments to the Federal Housing Administration’s 203(k) Rehabilitation Mortgage Insurance Program.

The proposed changes would employ many of the suggestions offered by MBA in its previous comments, including extending the $75,000 cap FHA proposes for high-cost regions to include all areas when utilizing the Limited 203(k), and allowing outside consultants to be used with the Standard 203(k).

Why it matters: Unlocking the FHA 203(k) renovation program is a key MBA priority, given its potential to address housing supply shortages by facilitating the rehabilitation of outdated and/or dilapidated housing stock that would otherwise lack marketability. MBA is pleased that many of the proposed enhancements are consistent with the items recommended in an April 2023 letter.

What’s next: MBA will continue to engage with FHA on 203(k) program updates.

For more information, please contact Darnell Peterson at (202) 557-2933.

VA Releases Circular Warning Servicers of Assumptions Non-Compliance

The Department of Veterans Affairs recently released a circular outlining the responsibilities of servicers regarding the processing of VA Loan Assumptions, primarily the importance of timely facilitation of assuming a loan.

In cases where a servicer willfully refuses to process an assumption in accordance with VA’s requirements on processing timelines, appeals and credit overlays, the VA has established procedures to address noncompliance. If VA determines there has been a violation, VA will provide a seven-day notice to resolve the failure. If the violation is not rectified, VA will assert a “defense against liability,” not pay on the guaranty, and notify Ginnie Mae of this action.

If VA determines there have been repeated offenses, it may take additional steps, including examination and audit, referral to the VA’s Office of Inspector General for investigation, penalties arising from the False Claims Act, or disbarment from program participation.

Why it matters: There has been a rise in inquiries for assumptions, driven by the high-interest rate environment. Last January, MBA sent a letter to FHA and VA, emphasizing that the fees they permit for assumption processing fall significantly short of covering the expenses associated with processing and underwriting assumption requests for new buyers or borrowers.

What’s next: MBA will work with VA and Ginnie Mae to address concerns about the lack of clarity on when the more draconian penalties will be utilized.

For more information, please contact Darnell Peterson at (202) 557-2933.

MBA Joins Coalition Letter on Draft Auto-Decision Technology Regulation in California

MBA recently joined the California Mortgage Bankers Association, the California Bankers Association, and California Credit Union League on a letter to the California Privacy Protection Agency’s regarding its draft Automated Decision Technology Regulations.

The letter stressed the importance of ensuring the CPPA acknowledges the real estate finance industry’s exemption under the California Privacy Protection Act as it moves closer to proposing these rules. The Coalition will submit formal comments once the rule making process begins, and this letter was a preemptive effort to provide the appropriate context for the industry’s use of this technology, and to help prevent any unintended consequences in future iterations of the rules.

Why it matters: California laws and regulations are often emulated by other states or stand as de-facto standards.

What’s next: MBA will continue to consult with member companies and support the California MBA and other coalition partners as this progresses.

For more information, please contact William Kooper at (202) 557-2737 or Liz Facemire at (202) 557-2870 and track state Data Privacy issues here.

New York Regulator Releases Final Climate Risk Mitigation Guidance

The New York Department of Financial Services in late December issued final Guidance for New York State Regulated Banking and Mortgage Institutions Relating to Management of Material Financial Risks from Climate Change. The Guidance is sweeping in its scope and represents one of the first attempts by a state financial services regulator to establish regulatory expectations specifically designed to mitigate climate risks.

Go deeper: While the final document contains changes from the 2022 proposal related to organizational governance and operational resilience, it tracks closely to the original proposal.

In March 2023, the New York Mortgage Bankers Association (NYMBA) and MBA filed a comment letter that urged NYDFS to align its work with federal regulators to the maximum extent possible to help produce a common approach on mortgage-specific topics. While there is no specific implementation date provided by NYDFS, MBA recommends members review the Guidance and begin consideration of how policies and procedures should be amended to comply.

Why it matters: MBA believes addressing climate risk requires an aligned approach between state and federal financial regulators rather than a patchwork quilt of requirements and supervisory expectations.

What’s next: NYDFS will host a webinar on January 11, 2024, at 11:30 a.m. EST to provide an overview of the Guidance. Register here.

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:

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

Transforming Lending Operations: How to Leverage Intelligent Automation – Jan. 30

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

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.