MBA Advocacy Update: CFPB Releases RFI on Closing Costs; VA VASP News; FHFA, GSEs Flex Mods Enhanced

CFPB Releases Anticipated RFI on Mortgage Closing Costs; MBA Shares Concerns Regarding Credit Reporting Price Increases

The Consumer Financial Protection Bureau (CFPB) on Thursday released its anticipated Request for Information (RFI) “Regarding Fees Imposed in Residential Mortgage Transactions.” The RFI seeks input from industry participants, consumers, and others on “the impact closing costs have on borrowers and the mortgage market,” citing, among other things, the rising costs for credit scores, credit reports, title insurance, and employment verification.

Read MBA’s summary here.

The RFI follows a March 2024 White House fact sheet and CFPB blog post on “lowering closing costs for home mortgages,” including the possibility of pursuing rulemaking and guidance to address purportedly “anticompetitive closing costs imposed by lenders on homebuyers and homeowners.”

While the RFI contains no specific policy proposals, MBA in press statements (here and here) and speeches made by MBA President and CEO Bob Broeksmit, CMB, (including at the Exchequer Club and at #MBASecondary24 earlier this month) has been critical about the CFPB’s consistent, illogical use of the term ’junk fees’ as it pertains to mortgage closing costs. 

Most of the fees the CFPB cites are required by the safety and soundness standards of the GSEs, federal guarantors and banking regulators. They also protect taxpayers and consumers and are fully disclosed to borrowers before they are committed to proceed with an application.

The CFPB itself has praised the federal disclosure regime – put in place at considerable cost to lenders just a decade ago – for protecting consumers and promoting shopping. While MBA supports efforts to reduce the cost of these services, concern remains about misguided or politically motivated proposals that would end up increasing costs, diminishing competition, and/or reducing credit availability. 

Go deeper:  MBA has been vocal about the sharply rising costs of credit reports and other credit reporting products and is pleased that the RFI specifically provides an opportunity to share concerns about the factors driving these pricing changes amidst challenging market conditions for lenders of all sizes and business models.

What they’re saying: Shortly after the RFI was released, MBA led a joint press statement with the American Bankers Association and Housing Policy Council that stated, among other important points: “If the CFPB is now modifying its previous position and is considering changing this complex regulatory disclosure regime, a rule-making process governed by the Administrative Procedure Act – and supported by a robust cost-benefit analysis – is the only appropriate vehicle to initiate that work. Such a rule-making process would allow for the proper level of engagement to produce changes that benefit consumers and do not add compliance costs and lead to negative unintended consequences.”

What’s next: MBA welcomes the opportunity to respond to the CFPB’s RFI and will work with members to provide an in-depth overview on mortgage closing costs, including answering the nine questions posed. Comments are due August 2, 2024.

For more information, please contact Pete Mills at (202) 557-2878, Justin Wiseman at (202) 557-2845, or Alisha Sears at (202) 557-2930.

VA Announces Years-End, Targeted Foreclosure Moratorium
On Wednesday, the Department of Veterans Affairs (VA) announced a targeted (and voluntary) foreclosure moratorium to December 31, 2024. The announcement effectively extends the current moratorium – which was originally announced last November – while servicers continue to implement the Veterans Affairs Servicing Purchase (VASP) Program by October 1st.

VASP policy guidance was formally announced in a separate Circular here.

The VA also extended the temporary COVID-19 Home Retention Options to September 30th – the Loan Deferment, Disaster Extend Modification, and the COVID-19 Refund Modification. VASP, which formally “launches” today, allows the VA to offer loss mitigation assistance to Veterans in today’s high-interest rate environment by purchasing a below-market modification from the servicer at 2.5%.

Why it matters: The VA’s announcement was expected, unsurprising, and follows direct engagement from the MBA with VA’s leadership on the VASP program.

Earlier this month, MBA delivered a letter to the VA expressing concerns with the implementation of VASP given the lack of sufficient details available.

Specifically, MBA expressed concern with improper expectations regarding the availability of the program to Veterans and the public, as well as requesting additional implementation once complete guidance was provided. Now, VA is hosting weekly calls to calls with the industry to collaborate and resolve the issues most important to implementing the VASP program and VA’s new mandatory loss mitigation waterfall.

Go deeper: According to the VA’s announcement, a servicer should not proceed with foreclosure unless:

The property is vacant or abandoned;

The borrower does not wish to retain homeownership;

The servicer has not received a monthly payment for at least 210 days and the borrower is unresponsive to the servicer’s outreach attempts; or

The servicer has evaluated the borrower for all home retention options but has determined that no home retention option, including VASP or alternative to foreclosure, will work for the borrower.

What’s next: The MBA will continue to monitor and communicate developments on the VASP program, including the servicing transfers work, which is expected to begin next week.

For more information, please contact Brendan Kelleher at (202) 557-2779.

FHFA, GSEs Enhance Flex Modification
On Wednesday, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the GSEs) have updated their Flex Modification policies to help more borrowers facing permanent financial hardship to achieve payment reduction.

Why it matters: The Flex Modification has long been the GSEs’ flagship home retention solution to help borrowers preserve affordable homeownership. The long-awaited announcement follows efforts by FHFA and the GSEs to consider improvements to the program to provide more meaningful payment relief to borrowers and create a durable program responsive to borrowers in different economic environments.

In January 2023, MBA advocated for FHFA and the GSEs to consider enhancements following lessons learned from the COVID-19 pandemic.

Go deeper: Moving forward, servicers will determine a borrower’s terms for the Flex Modification by incrementally applying the required steps to achieve a targeted Principal and Interest (P&I) reduction:

Reduce the borrower’s rate (if eligible);

Extend the mortgage in monthly increments up to 40 years; and

Forbear principal for borrowers with a mark-to-market-loan-to-value ratio greater than 50% (this was previously 80%).

What’s next: Servicers can implement these enhancements as early as November 1, 2024, but no later than December 1, 2024.

For more information, please contact Brendan Kelleher at (202) 557-2779.

FHA Provides Servicers Some Relief from Show Me
On Tuesday, the Federal Housing Administration (FHA) announced – in an FAQ – that servicers can request reimbursement of attorney’s fees for judicial foreclosures in states where a non-judicial foreclosure is the preferred method of foreclosure, but a servicer instead decided to proceed judicially due to the presence of an FHA subordinate lien.

Why it matters: Tuesday’s clarification follows long-awaited action by FHA – and advocacy by MBA – to address some of the challenges created by the U.S. Court of Appeals for the 8th Circuit holding in Show Me State Premium Homes vs. McDonnell.

As a reminder, Show Me held that a subordinate lien held by the United States – such as an FHA Partial Claim – must be foreclosed by judicial action. As a result of the persuasive authority of the 8th Circuits’ holding, Show Me created a national logjam requiring FHA servicers to proceed judicially on FHA Partial Claims – a process that is more time consuming and costly for both servicers and FHA – than the non-judicial process.

Go deeper: While MBA appreciates FHA’s important guidance, the announcement is not a direct policy solution to Show Me that would allow servicers to comply with the Reasonable Diligence schedules (foreclosure timelines) outlined in FHA’s Handbook. Such a solution may require Congressional action.

What’s next: MBA will continue to advocate for a policy solution by FHA to address the concerns from Show Me.

For more information, please contact Brendan Kelleher at (202) 557-2779.

Participate in MORPAC Action Week, June 3-7!
This is MORPAC Action Week, the annual fundraising campaign dedicated to strengthening our industry’s bipartisan political action committee.

Join the 25+ MBA member organizations running concurrent campaigns to raise dollars for MORPAC and help make a bigger impact in supporting candidates who support the real estate finance industry.

Why it matters: MORPAC helps MBA to maintain a “seat at the table” and actively participate in efforts to help try and shape pro-industry policies. MORPAC is also an easy way to plug your member firm and employees into supporting important advocacy issues, reinforcing the mission of helping to participate as one of the many voices of real estate finance to our federally elected officials.

What’s next: If your company is willing to run a MORPAC campaign (company-wide or executive level), please complete this form. As an added benefit, get involved in the four-part MORPAC Speaker Series Events taking place next week – and hear directly from key politicos working for the respective House and Senate party campaign committees.

For more information and/or for MORPAC Action Week materials, please contact Erin Reilly at (202) 557-2751.

Minnesota Governor Walz Signs Legislation with Broad Data Privacy Language
Minnesota Governor Tim Walz recently signed a large omnibus bill package, HF 4757, which included the Minnesota Consumer Data Privacy Act (MCDPA). The Minnesota Mortgage Association and MBA worked to include MBA’s model amendment language to provide exemptions for federal Gramm-Leach-Bliley compliance.

Minnesota is now the 18th state to enact broad data privacy legislation. The MCDPA effective date is July 31, 2025. Importantly, MCDPA only includes data exemptions for GLBA data, or data intermingled with GLBA, and additional narrow activities-based exemptions for IMBs; depositories are wholly exempt.

Why it matters: By failing to fully recognize the current standard of data protection provided under the federal GLBA for IMBs, Minnesota lawmakers and leadership have created an uneven playing field between depositories and non-depositories.

MCDPA now adds to a concerning state-by-state patchwork of rules that will increase costs for consumers, add to IMB member company risks, and may lead to lower competition in the market.

What’s next: MBA will continue to engage and track broad data privacy bills along with state partners.

For instance, the Vermont Data Privacy Act passed earlier this month and now awaits signature.

Since 2018, broad data privacy legislation has been gaining traction across the states. It is important for member companies and state and local association partners to continue to coordinate with MBA to help educate policymakers on the importance of extending the GLBA exemption to all financial institutions covered by the GLBA.

For more information, please visit our State Data Protection Issues resource page or contact William Kooper (202) 557-2727 or Liz Facemire (202) 557-2870.

State Regulators Request Comments on Proposed NMLS Fee Increase; NMLS Town Hall on June 13th
The Conference of State Bank Supervisors (CSBS) recently released proposed changes to the fee structure of the Nationwide Multistate Licensing System (NMLS) for comment.

The proposed increases would take effect in March 2025 and would be implemented for all mortgage, consumer finance, debt, and money services businesses applicants and licensees in the NMLS.

Go deeper: The proposal calls for an increase from $100 to $120 in initial set-up and application processing fees for banks and independent mortgage banks (IMBs). In addition, CSBS proposes $5 increases for IMBs for: branch initial set-up and application processing (currently $20); annual processing fee (currently $20); individual initial set-up and application processing as well as the annual processing (currently $30); and, MLO change of sponsorship (currently $30). Similar $5 increases are proposed for banks’ application, set up, and change of employment fees.

Why it matters: The proposal offers details related to the history of the NMLS system and its fees, but it does not provide specifics about the business purpose of these additional funds other than to state the need to cover increased technology costs, rising inflation, and a long period without increases.

Given that the NMLS serves as a nationwide regulatory system with mandatory compliance, NMLS should be obliged to engage in a budgetary process similar to its federal regulator counterparts and its state regulator members with respect to transparency about its budget and the planned programmatic uses of these increased revenues.

Additionally, real estate finance companies have been, and remain, the largest payor of fees for a system that has significantly expanded to numerous non-mortgage license types. MBA wants to ensure that the expanded NMLS mission is being appropriately funded by the other nonmortgage licensees benefiting today from the many years of mortgage industry investment.

What’s next: MBA will convene with members to develop and submit comments ahead of the July 22nd due date. Members and other stakeholders can also participate in CSBS’s planned NMLS Town Hall to review and discuss the proposal by registering here.

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

NMLA, MBA Give Feedback on Nevada Proposed Remote Work Regulations
The Nevada Mortgage Lenders Association (NMLA) and MBA submitted joint comments in response to Nevada’s proposed regulations to implement SB 355, which allowed remote work. The proposal included an excessively narrow view on remote work and is in need of clarifying language.

NMLA and MBA’s letter requested more clear language for when remote work is allowed, to whom remote work flexibility applies, removal of language that restricts multiple employees/mortgage loan originators (MLOs) from working remotely at the same location, and lowering the pre-authorization burden for allowing remote work.

Why it matters: By restricting the flexibility that was intended by passage of SB 355, this proposal would move this policy in the wrong direction and away from creating a more nimble and sustainable workforce.

What’s next: MBA will continue to work with its members and partner state associations to support remote work policies consistent with the association’s model law and regulation.

For more information, please visit the MBA’s Remote Work Policies resource center 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 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:

Automating Efficient and Empathetic Servicing Experiences for Your Borrower – June 4

Bank-Owned Mortgage Divisions: What Bankers Need to Know to Manage Mortgage Banking – June 11

Best Practices for Ensuring Clarity, Speed and Compliance in Borrower Communications – June 13

Adding Reverse Mortgages to Your Business Line: The Value Proposition – June 20

Unpacking the Costs and Current State of Homeowners Insurance – June 20

Fundamentals of Loss Mitigation for Residential Servicers – June 25

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.