MBA Advocacy Update: Numerous FHA Updates; Hill Hearings Recap on Tax Policy; more
MBA Releases Summary on FHA Annual Report to Congress
MBA released a summary of the key takeaways from the recent release of the Annual Report to Congress on the financial status of the Federal Housing Administration (FHA) Mutual Mortgage Insurance Fund (MMI Fund).
The report announced a strong combined capital ratio of 11.47% – a slight increase from the 10.51% level in 2023 and well above the statutory minimum of 2.0%.
MBA’s summary highlights that FHA’s key risk metrics – FICO score distribution, DTIs and DPA exposure – each remained static or improved year-over-year, while key mission metrics – share of first-time buyers, and share of LMI and minority borrowers – show the value of the program to housing access and affordability.
In addition, the summary notes that independent mortgage banks originated nearly 90% of all FHA loans in 2023.
What they’re saying: MBA’s President and CEO Bob Broeksmit, CMB, in a press statement, said “At 11.4%, the Mutual Mortgage Insurance Fund is more than five times the statutory minimum reserve ratio. While it is sensible to have a healthy cushion above the 2% minimum reserve, qualified borrowers should not be charged higher mortgage insurance premiums (MIP) than necessary.
“In addition to pursuing more program enhancements to boost housing supply and affordability, such as this year’s 203(k) program updates, borrowers would see meaningful payment relief from FHA eliminating its life of loan premium requirement and making another reasonable cut to the MIP.”
Why it matters: The strength of this year’s annual assessment of the health of the MMI Fund provides an opportunity for HUD to consider further changes to the level and structure of FHA premiums to reduce costs to borrowers while maintaining strong reserves above the minimum.
What’s next: MBA will work with HUD – and the incoming Trump administration – as they evaluate any potential changes to FHA pricing and will continue to advocate for other program updates that boost supply and improve affordability.
For more information, please contact Darnell Peterson at (202) 557-2922.
FHA Proposes Expanded Flexibilities for Underwriting Rental Income
On Wednesday, in a move to expand credit access, FHA issued a draft Mortgagee Letter (ML) that revises its policies on the use for rental income in the underwriting process.
Go deeper: Under the revised policy, borrowers must demonstrate a history of receiving boarder income for at least 9-12 months, with the rental income capped at 30% of their total effective monthly income.
What they’re saying: Pete Mills, MBA SVP of Residential Policy and Strategic Industry Engagement, in a statement to National Mortgage News said, “Developing consistent and aligned policies around how to underwrite rental income is a priority for our members. Given current affordability challenges — especially for lower-income families — these enhanced rental income flexibilities will help to safely expand homeownership opportunities for eligible borrowers using rental income for a home purchase.”
Why it matters: The proposed ML expands access to FHA-insured mortgages by allowing borrowers to use boarder rental income as part of their qualifying income, reflecting modern housing trends and affordability strategies.
What’s next: MBA will collect feedback from members of the Government Loan Productions Subcommittee and submit comments by the December 10, 2024, deadline.
For more information and to provide comments, please contact Darnell Peterson at (202) 557-2922.
FHA Extends New Face-to-Face Compliance Date
On Thursday, FHA extended the effective date for mortgagees to comply with its new rule, Modernization of Engagement with Borrowers in Default, to July 1, 2025.
Why it matters: Originally effective January 1, 2025, FHA’s extension provides servicers with additional time to implement the new procedures and guidance that FHA proposed to the drafting table in August 2024. Aligning with recommendations from MBA and other trades, servicers can continue to rely on two exceptions to FHA’s longstanding in-person meetings requirement – the borrower does not reside in the property or the property is outside of a 200-mile radius.
What’s next: MBA will continue to monitor and communicate FHA’s final guidance once published.
For more information, please contact Brendan Kelleher at (202) 557-2779.
FHA Issues Proposal to Adopt Industry Standard Forms for Title I Loans
On Monday, FHA released a draft Title I Letter for public review, proposing to replace the Title I loan application forms (HUD-56001 for Title I Property Improvement Loans and HUD-56001-MH for Manufactured Home Loans) with the industry-standard Uniform Residential Loan Application (URLA) (Fannie Mae Form 1003/Freddie Mac Form 65) and a new HUD Addendum to the URLA for Title I Loans (form HUD-92900-TI).
Why it matters: The proposed change aims to simplify the Title I loan application process by allowing lenders to leverage existing origination system technology to collect borrower data in an attempt to eliminate the costs of acquiring multiple software licenses or manually completing Title I-specific forms.
FHA believes these updates will reduce barriers and encourage greater lender participation in the Title I program.
What’s next: MBA will solicit feedback from members and will submit comments by the December 18, 2024, deadline.
For more information or to provide feedback, please contact John McMullen, AMP, at (202) 557-2706.
VA Proposes Reporting Rulemaking
On Wednesday, the Department of Veterans Affairs (VA) proposed a new rule, “Loan Guaranty: Loan Reporting and Partial and Total Loss of Guaranty or Insurance” for notice and comment.
The VA’s proposal requires lenders to use an application programming interface (API) when reporting a loan and remitting the funding fee to the VA for a Loan Guaranty Certificate (LGC).
Lenders would also make required certifications and submit Veteran certifications using the API. The proposed rule also clarifies criteria for a partial or total loss of guaranty or insurance.
Why it matters: The VA’s proposal advances its efforts to modernize its technology and processes, while supporting monitoring and oversight of program participants. Additionally, the proposed rule allows the VA to cite defenses based on fraud, misrepresentation, and servicing failures, while providing participants with recourse options.
What’s next: Comments are due January 21, 2025. MBA is reviewing the proposal and will organize its response through the Government Loan Production and Loan Administration Committees.
For more information, please contact Darnell Peterson at (202) 557-2922 or Brendan Kelleher at (202) 557-2779.
MBA, Trades Call on FHFA to Rescind RCV Bulletins
On Monday, MBA, the American Bankers Association, and the Housing Policy Council sent a letter to the Federal Housing Finance Agency (FHFA) asking for Fannie Mae and Freddie Mac (the GSEs) to rescind the bulletins issued in February 2024 regarding property insurance verifications and to confirm that the current industry practice of verifying that an insurance policy pays claims on a replacement cost basis meets GSE requirements.
The letter also asks FHFA to recall the associated surveys currently being conducted with lenders, servicers, insurers, and trade groups. A copy of the letter was also sent to the leadership of the Senate Banking Committee and the House Financial Services Committee.
Why it matters: The 2024 Bulletins created significant operational, legal, and consumer protection questions that the associated surveys fail to consider.
What’s next: The letter urges FHFA and the GSEs to engage first with the property and casualty insurance sector and if, after this engagement, additional information is needed, initiate a transparent and public Request for Information that clearly identifies any safety and soundness concerns.
MBA will keep members informed on this and other FHFA issues.
For more information, please contact Sara Singhas at (202) 557-2707 or Brendan Kelleher at (202) 557-2707.
A Study in Contrasting Views: Two Separate Hearings on Looming 2025 Tax Debate
On Tuesday, the Joint Economic Committee (JEC) held a hearing to discuss the looming debate over the 2017 Tax Cuts and Jobs Act’s (TCJA) expiring provisions.
Elected officials from both sides of the political aisle signaled some agreement around the need to leverage the tax code to incentivize housing production and/or support families/small businesses. Find the full hearing summary here; watch the hearing here.
On Wednesday, the Senate Banking Committee’s (SBC) Subcommittee on Economic Policy held what became a partisan hearing titled, “Tax Policy in 2025: Implications for the American Economy.” A transcript of the SBC hearing (which no Republican Senators attended) can be found here.
Why it matters: Members of the JEC – which consists of elected officials from both the U.S. House and Senate – questioned their hearing’s witnesses on the perceived strengths and weaknesses of the 2017 tax cuts, their effect on economic growth and the deficit, and how Congress should amend or codify expiring provisions.
By way of contrast, the SBC’s Economic Policy Subcommittee Chair Elizabeth Warren (D-MA) expressed concern over the lack of promised wage growth from prior tax reforms and cautioned that Senate Democrats will oppose tax cuts without commensurate “pay fors.” Senator Tina Smith (D-MN) attacked tax benefits provided to institutional investors who subsequently purchased single-family homes.
Several hearing witnesses affirmed the importance of using the tax code to expand housing supply through the Low-Income Housing Tax Credit and identifying ways to boost homeownership.
Go deeper: The contrasting dialogue at both hearings was predictably split along party lines. JEC Republicans were largely supportive of the TCJA’s effects and reiterated their support for extending the tax cuts and making certain provisions permanent. Conversely, Democrats at both hearings interpreted the effects of the TCJA statute as largely detrimental and voiced concern about the likely effect on the national debt should the law be fully extended past the December 31, 2025, sunset.
Why it matters: Several central provisions of the TCJA are expiring at the end of next year, including the Section 199a “pass-through” deduction. Other provisions of the current tax code important to real estate finance, e.g., Section 1031 like-kind exchanges, business interest deductibility, the treatment of capital gains vis-à-vis carried interest transactions, the capital gains exclusion for a gain on a housing sale, the deferred tax treatment on mortgage servicing rights, etc., may be at risk as offsets to other potential tax policy changes.
Read MBA’s tax fact sheet/briefing.
What’s next: GOP leaders in the 119th Congress will likely move to advance a budget resolution in January that will be used to try and extend the TCJA’s expiring tax provisions. MBA stands ready to work with the incoming Trump administration and lawmakers on both sides of the aisle as the tax debate evolves and takes shape next year.
For more information, please contact Rachel Kelley (202) 557-2816, Madisyn Rhone at (202) 557-2741, Ethan Saxon at (202) 557-2913, or George Rogers at (202) 557-2797.
Prudential Regulators Testify, Pledge to Suspend Rulemakings Before House Financial Services Committee
Last week, Federal Reserve Vice Chair Michael Barr, Federal Deposit Insurance Corporation Chair (FDIC) Martin Gruenberg, National Credit Union Administration Chair (NCUA) Todd Harper, and Acting Comptroller Michael Hsu (OCC) testified before the House Financial Services Committee (HFSC).
The hearing addressed key regulatory topics, including the Basel III Endgame, community bank concerns, and FDIC workplace culture reforms.
Why it matters: Regulators emphasized topics such as the resilience of the U.S. banking system, cybersecurity, and a list of pending regulations in the rulemaking queue from the Biden administration.
Go deeper: The officials from the Federal Reserve, FDIC, and OCC said major rulemaking, including the Basel III Endgame, would be suspended until President-elect Trump takes office in January.
What they’re saying: “I do think it’s important to finalize the Basel process, to raise capital standards to a level playing field across the international system, and to take into account the risks that we saw from the global financial crisis that were not yet fully incorporated into our minimum requirements,” said Federal Reserve Vice Chair Michael Barr.
“We have a number of pending rulemakings, and for some of them we’ve extended the comment period,” said FDIC Chair Martin Gruenberg. “We don’t think any of them will be ready for action before the end of the year.”
Find a full hearing summary here.
What’s next: HFSC members are expected to follow up on FDIC workplace reforms and proposed changes to capital standards in upcoming hearings. MBA will continue to monitor developments on these and other issues during the remainder of the 118th Congress, the waning days of the Biden administration, and throughout the Trump transition.
For more information, please contact Rachel Kelley (202) 557-2816 or Madisyn Rhone at (202) 557-2741.
House of Representatives Passes Bill to Extend VA Home Loan Fees
On Monday the full House of Representatives passed H.R. 8371, The Senator Elizabeth Dole 21st Century Veteran’s Healthcare and Benefits Improvement Act, by a vote of 389 to 9.
Why it matters: The appraisal and reverification of employment flexibilities allow for reduced face-to-face contact in the homebuying process and relieves the difficulties associated with social distancing or work-from-home policies.
Go deeper: Notably, Sec. 503 of the bill would extend the VA home loan funding fee from November 29, 2031, to June 9, 2034, to offset the cost of the legislation.
This would increase a Veteran’s monthly mortgage cost by about $5 for the duration of the loan ($1,800 for the life of the loan) and would only impact borrowers who do not have a service-connected disability.
What’s next: MBA will continue to oppose increases in the VA home loan funding fee that erode the value of the benefit – and monitor this particular bill’s prospects for passage in the Senate.
For more information, please contact Rachel Kelley (202) 557-2816 or Madisyn Rhone at (202) 557-2741.
[VIDEO]: mPower Moments: On Reaching Your Full Potential with Ursula Burns
mPower Founder Marcia M. Davies sits down with Ursula Burns, former CEO of Xerox Corporation, for an in-depth conversation on how her upbringing impacted her career journey as well as how it shaped her leadership style.
Go deeper: Burns also discusses the current state of the corporate world and emphasizes the importance of leveling the playing field for women to cultivate further progress in achieving workplace equity and equality. She also provides helpful advice on how the next generation can be agents of change when developing new corporate models that benefit all professionals.
To watch more mPower Moments, click here.
For more information, please contact Marcia Davies (202) 557-2707.
Upcoming MBA Education Webinars on Critical Industry Issues
MBA Education continues to deliver timely single-family programming that covers the spectrum of challenges, obstacles and solutions pertaining to our industry. Below, please see a list of upcoming and recent webinars – all complimentary to MBA members:
Master the Art of Pricing and Rate Lock Strategies – December 10
High Performance Negotiations – Lessons and Strategies – December 17
Fundamentals of Commercial Insurance Issues and Problems – January 28
CREF Career Conversations: Insights from Industry Leaders – January 28
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 at (202) 557-2931.
