Advocacy Update: Supreme Court Rules in CFPB’s Favor; FSOC Released Report on Nonbanks; Prudential Regulators Testify on the Hill

Supreme Court Upholds CFPB’s Funding

The U.S. Supreme Court last week ruled in a 7-2 opinion that the Consumer Financial Protection Bureau’s (CFPB) appropriations mechanism is constitutional, reversing a previous decision by the U.S. Court of Appeals for the 5th Circuit.  

The Court’s decision in the case, Community Financial Services Association (CFSA) v. Consumer Financial Protection Bureau, rejects an argument by CFSA that the CFPB’s funding structure ran afoul of the Constitution’s Appropriations Clause.  

What they’re saying: MBA’s Broeksmit in a press statement said, “MBA is relieved that the Supreme Court avoided a ruling that would have disrupted the housing and mortgage markets and harmed the economy and consumers.”

Go deeper: Last year, MBA filed a joint amicus brief, which took no position on whether the Bureau is constitutionally funded but instead focused the Court’s attention on how to avoid disrupting the housing and mortgage markets.

The brief suggested that if the Bureau’s funding structure is ruled unconstitutional, the Court should sever those funding provisions and preserve the Bureau’s past actions until Congress corrects the constitutional appropriations problems.    

What’s next: There is no immediate impact on real estate finance rules from today’s decision. MBA’s summary can be read here.

For more information, please contact Justin Wiseman at (202) 557-2845, Alisha Sears at (202) 557-2930 or Stephanie Milner at (202) 557-2747.

FSOC Releases Report on Nonbank Mortgage Servicing

Friday, the Financial Stability Oversight Council (FSOC) approved and released a “Report on Nonbank Mortgage Servicing.”

The report includes several recommendations to Congress and state regulators to address what it considers “key vulnerabilities” within the nonbank mortgage servicing space.

These include recommendations for Congress to create an emergency fund financed by IMBs; provide the Federal Housing Finance Agency (FHFA) with authority to directly supervise IMBs; and expand Ginnie Mae’s Pass-Through Assistance Program (PTAP).

Other recommendations included encouraging state regulators to require recovery and resolution planning by large IMBs, enhanced information sharing with FHFA, and adopting enhanced prudential standards in states that have not yet done so.

What they’re saying: MBA’s Broeksmit released a statement after the report, stating, “We share FSOC’s goals of a safe, stable, and sustainable financial services marketplace, but some of the report’s recommendations are unnecessary. Years of punitive regulatory capital treatment have already limited the willingness and ability of depository institutions to participate in the mortgage lending and servicing markets. While we support national standards for capital and liquidity requirements, layering duplicative supervision requirements or supervisory entities onto a heavily regulated market will add significant cost and complexity.”

Why it matters: While some of the recommendations could be beneficial by providing liquidity support to IMBs, others – especially the call for an IMB emergency fund, direct FHFA supervisory authority over IMBs, and even higher state-level capital requirements – are not only unnecessary but would likely increase costs for borrowers.

Read our recent letter to Treasury Secretary Janet Yellen on this topic.

What’s next: MBA will continue to engage with the FSOC agencies, Ginnie Mae, state regulators, and others to identify effective solutions that do not undermine the IMB business model.

For more information, please contact Matt Jones at (202) 557-2933.

Prudential Regulators Appear Before House and Senate Committees

Last week, Federal Reserve (Fed) Vice Chair Michael Barr, Federal Deposit Insurance Corporation (FDIC) Chair Marty Gruenberg, and Acting Office of the Comptroller of the Currency (OCC) Michael Hsu testified before both the House Financial Services (HFSC) and Senate Banking, Housing, and Urban Affairs (SBHUAC) Committees.

The hearings came on the heels of a long-anticipated report released by law firm Cleary Gottlieb Steen & Hamilton examining allegations concerning sexual harassment and interpersonal misconduct at the FDIC. As anticipated, both HFSC and SBHUAC Republicans reiterated their pleas for Gruenberg to resign.

See a full summary of both the House and Senate hearings here and here.

Why it matters: Several lawmakers’ questions also focused on the ongoing status of the regulators’ Basel III “Endgame” proposal. Similar to previous hearings, many Republicans criticized aspects of the proposal and urged regulators to withdraw it. Additionally, some Democrats reiterated concern with certain provisions, including its impact on mortgage credit availability and the treatment of tax equity investments.

Notably, Vice Chair Barr refrained from echoing Fed Chair Jerome Powell’s previous statement about a re-proposal being a “live option,” while signaling there would be “broad and material changes” to the rule. Vice Chair Barr also highlighted that the Fed’s Quantitative Impact Study (QIS) on the proposal will be released “relatively soon.”

Go deeper: Republicans and Democrats both questioned the regulators on last week’s FSOC report on nonbank mortgage servicers.

What’s next: Rep. Brad Sherman (D-CA) asked HFSC Chairman Patrick McHenry (R-NC) to schedule an additional hearing specifically focusing on the Cleary report and Chair Gruenberg’s oversight of the FDIC.   

MBA will continue to advocate strongly for our industry’s preferred outcomes on the Basel III proposal – and in reaction to the recent FSOC report.

For more information, please contact Ethan Saxon at (202) 557-2913, George Rogers at (202) 557-2797, Rachel Kelley at (202) 557 2816, or Madisyn Rhone at (202) 557-2741.

MBA Shares Views on Pertinent Bills at Extensive House Financial Services Committee Markup

On Thursday, the full HFSC considered and approved 11 bills during a full-day legislative “markup.” The broad slate of bills approved by the panel included proposals designed to ease regulations on banksfence in the Securities and Exchange Commission (SEC), and potentially boost housing supply.

Why it matters: MBA shared a letter in advance of the markup with all HFSC member offices to reveal our specific industry views regarding: the Yes in My Back Yard (YIMBY) Act legislation designed to help eliminate discriminatory land use policies and remove barriers that depress affordable housing production; two titles within one bill that would limit the scope of the CFPB’s Section 1071 small business reporting rule requirements; another bill that would more clearly define the abusiveness standard under CFPB’s UDAAP authorities; a proposal to expand access to banking activities (including mortgage services) through the establishment of de novo financial institutions; and, a bill to compel the Treasury Department’s Director of the Community Development Financial Institutions (CDFI) Fund to testify annually before Congress.

Go deeper: All of the MBA-supported bills were cleared by the panel (the YIMBY Act was approved unanimously). Find additional markup summary details here. Examine two additional joint industry letters signed by MBA and other trade groups in support of the YIMBY Act here and here.

What’s next: MBA will continue to weigh in on and seek to advance our industry’s priority policies – including trigger leads legislation – in the few remaining HFSC markups expected to be held before the end of the 118th Congress.

For more information, please contact Madisyn Rhone at (202) 557-2741 or Rachel Kelley at (202) 557-2816.

FHFA Releases Request for Input on Mission of Federal Home Loan Banks

Last Thursday, FHFA released a Request for Input (RFI) on the mission of the Federal Home Loan Banks’ (FHLBanks).

Specifically, FHFA is seeking input on three key areas: (1) updating the regulatory statement of the FHLBank System’s mission to better reflect its appropriate role in the housing finance system; (2) developing metrics and thresholds to evaluate mission achievement; and (3) identifying how the FHLBanks could incorporate incentives for members with a strong and demonstrable connection to the FHLBank System’s mission.

Why it matters: In November 2023, FHFA released its FHLBank System at 100: Focusing on the Future report, its comprehensive review of the FHLB System in anticipation of the System’s centennial in 2032.

Go deeper: MBA stressed the importance of expanding FHLB membership and maintaining the types of collateral that members can pledge under the current system in an October 2022 comment letter.

What’s next: MBA will review the RFI and work with members to provide a response by the July 15, 2024, deadline.

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

MBA Joins Joint Trades Letter to FHFA on Credit Score Historical Data

Last week, MBA and four other trade associations submitted a joint trades letter to FHFA providing recommendations related to the release of historical data for FHFA’s Alternative Credit Score Initiative.

The letter was submitted in advance of the publication of the VantageScore 4.0 historical dataset that the FHFA plans to release in the third quarter. Based on member and industry feedback, MBA has concerns that the information could be insufficient to meet the data analytics needs of members. The letter highlights potential issues as well as provides recommendations for FHFA to consider prior to publishing the data.

Why it matters: The analysis of the historical data is a critical first step in the credit score initiative. MBA hopes that by providing early, proactive, and constructive feedback to FHFA and the GSEs, industry stakeholders will be able to receive a useful historical dataset to perform their analysis and testing.

What’s next: MBA along with the other trade associations have requested the opportunity to meet with FHFA to discuss the recommendations and concerns outlined in the joint trades letter.

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

Movement on New State Data Privacy Laws: Maryland Legislation Signed; Vermont Bill Passed

Last week, Maryland Governor Wes Moore signed the Maryland Online Data Privacy (MODP) Act and the Vermont legislature passed the Vermont Data Privacy Act (VDPA).

Seventeen states have now enacted broad data privacy laws, and Vermont is expected to become the 18th state.

MODP will take effect on October 1, 2025, while VDPA, if enacted, will take effect July 1, 2025. Importantly, MODP includes an MBA-supported exemption for financial institutions, affiliates of financial institutions, and data subject to the Gramm-Leach-Bliley Act (GLBA). VDPA, however, only includes data exemptions for GLBA data, or data intermingled with GLBA, and additional narrow activities-based exemptions.

Why it matters: The Maryland legislature recognized the current standard of data protection provided under the federal GLBA, ensuring the real estate finance industry can continue to process information pursuant to existing federal data protections.

Vermont allowing VDPA to proceed – without provisions acknowledging the current federal standard – unfortunately adds to a concerning state-by-state patchwork of rules that will increase costs for consumers, add to member company risks, and may lead to lower competition in the market.

What’s next: Since 2018, broad data privacy legislation has been gaining traction across the states and this trend is expected to gain momentum. 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 the GLBA exemption to the industry.

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.

MBA and Colorado Mortgage Lenders Association Urge Veto of AI Bill

The recent passage of Colorado’s first in the nation legislation to regulate artificial intelligence (AI) on the final hours of the state’s legislation session, MBA and the Colorado Lenders Association submitted a joint veto request to Governor Jared Polis.

While the bill is well-intentioned, it fails to fully consider the totality of the real estate finance system and would hold IMBs accountable for AI tools they do not own nor control but rely on to extend credit through the affordable housing programs of the federal government.

Why it matters: Similar legislation was being considered in Connecticut, but it failed last week because Governor Ned Lamont threatened a veto out of concern for unintended consequences. That result has cleared the path for Colorado to set a concerning precedent that could quickly spread to other states. For example, California is also considering an AI law during the current legislation session that runs through August.

What’s next: MBA will continue to work with its state partners to advocate for the needs of the real estate finance industry as this debate continues at the federal and state level.

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

MAA Issues Second Call to Action to Oppose Illinois Study to Establish CRA Exam Standards

MBA’s Mortgage Action Alliance (MAA) issued a second Call to Action asking Illinois members to urge their state representatives to oppose a bill (SB 3235) that would mandate the Illinois Commission on Equity and Inclusion (Commission) conduct a mortgage lending “Disparity Study.”

The Study was originally included in the second notice of proposed regulations to implement the Illinois Community Reinvestment Act (ICRA) in late 2023 by the Department of Financial and Professional Regulation (DFPR).

Go deeper: MBA objected to the Study at the time because DFPR did not offer it as part of a public comment process and because the regulatory proposal included no assurances it would be conducted independently. The Study was subsequently removed from the re-proposed ICRA regulations. However, it has now been proposed through SB 3235 with the same problematic language and direction.

The Commission has no known experience or expertise in financial services or real estate finance and it is inappropriate to task it with conducting a mortgage lending study. Further, the legislation fails to ensure the Study would be conducted by an organization with a non-advocacy mission.

The bill offers no certain opportunity for industry feedback on the Study’s results nor does guarantee Commission will explain any potential causes or context for disparity or legally compliant ways to address them.

Why it matters: SB 3235 Study’s findings could be implemented into ICRA examination criteria, which could change these exams from an LMI-based assessment to one based on race.

Additionally, because the Study will not clearly address causes of any disparity, DFPR may improperly incorporate its results into CRA exams. Rather than providing a means to improve CRA exam results of member companies, the Study supports a punitive enforcement-based approach towards supervision of licensees.

What’s next: MBA will continue to support efforts to expand access to credit while opposing efforts that add compliance costs without resolving any of the underlying barriers to credit. If you are a resident of Illinois and have not taken action yet, please click here to do so now.

For more information, please contact William Kooper at (202) 557-2737 or Liz Facemire at (202) 557-2870. For more information about MAA, please contact Jamey Lynch at (202) 557-2818.

[VIDEO] mPower Moments: Utilizing Personal Strengths with MISMO’s Jan Davis

mPower Founder Marcia M. Davies sits down with Jan Davis, MISMO’s VP of Operations, for an in-depth conversation on her career journey and how she joined the mortgage industry through her passion for data and technology.

Go deeper: Davis discusses her motivation behind being a woman professional in data and technology and how she has been able to enjoy her career by being willing to learn new things and being passionate about the industry’s mission. She also provides helpful advice on how the next generation of professionals can succeed by being a team player and bringing their authentic voice to the table.

What’s next: To watch more mPower Moments, click here.

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

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:

Introduction to Commercial Mortgage-Backed Securities – May 23

Culturally Competent Marketing and Messaging for Hispanic Homebuyers and Homeowners – May 30

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

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

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