Advocacy Update: MBA Seeks RESPA Section 8 Reforms; CFPB Section 1033 Final Rule; MBA Comments on FDTA Proposed Rule
MBA Releases White Paper Recommending RESPA Section 8 Reforms
Comprehensive reforms are necessary to modernize Section 8 of the Real Estate Settlement Procedures Act (RESPA) to better serve consumers and the real estate finance industry in today’s highly-regulated mortgage market. That is according to new white paper, “RESPA at 50: Key Reforms to RESPA Section 8 to Better Serve the Modern Mortgage Market,” released by MBA.
What they’re saying: “It is time to have a conversation about the purpose and effectiveness of RESPA Section 8. At 50 years old, there appears to be little evidence that the law’s intention of lowering settlement costs has ever occurred, and new marketing technologies and reforms since the passage of the Dodd-Frank Act have rendered it obsolete and costly with few consumer benefits,” said MBA’s President and CEO Bob Broeksmit, CMB. “Modernizing and providing more clarity on structuring marketing services agreements and affiliated business arrangements and making it easier for lenders to market digitally to consumers would spur greater competition, increase consumer choices, and lower settlement costs without compromising core protections.”
Go deeper: Part I of the white paper describes how the current regulatory regime controlling referrals between settlement providers often leaves service providers without a strong indication of whether they are complying with those requirements. Part II provides a background on how the passage of the Dodd-Frank Act and subsequent reforms have made RESPA Section 8 outdated and ineffective. Part III of the white paper proposes several solutions to modernize RESPA.
The proposals include reforms and/or updated guidance on marketing services agreements (MSAs) and desk rentals, digital marketing and lead generation, and affiliated business arrangements.
Additional MBA recommendations include items that the Consumer Financial Protection Bureau (CFPB) could act on now:
Bring RESPA in line with current jurisprudence and ensure mortgage lenders and settlement service providers have clarity as to their potential liability.
Recognize in guidance and in future actions that, as demonstrated by both its plain statutory terms and its legislative history, RESPA sets only limited prohibitions on the payment of a thing of value for a referral.
Update its guidance to recognize that subsequent litigation should change their interpretation of RESPA in certain situations and make changes to the way RESPA is litigated.
What’s next: MBA thanks the Legal Issues and Regulatory Compliance Committee and members that have contributed to the white paper. MBA and its members stand ready to work with the CFPB, Congress, and industry stakeholders to reform this expensive and outdated compliance regime to the benefit of consumers and lenders alike.
For more information, please contact Justin Wiseman at (202) 557-2854 or Alisha Sears at (202) 557-2930.
CFPB Releases Final Rule Implementing Section 1033
On Tuesday, the CFPB released its final rule implementing Section 1033 of the Dodd-Frank Act.
At a high level, the final rule would require depository institutions and nonbanks to make consumer information available to the consumer and third parties. This proposal is meant to promote open banking, which is a system of entities sharing personal financial data with consumer authorization. MBA’s summary of the final rule is available here.
Why it matters: The final rule is very similar to the proposed rule released by the CFPB last year. In response to that proposed rule, MBA submitted comments that asked the CFPB to extend the implementation deadline and to allow consumers to opt-in to secondary uses of their data. Although the CFPB did not change the rules around secondary use of data, they have extended the implementation deadline and allow the use of consumer information to improve a consumer requested product or service.
What’s next: MBA will continue to monitor the implementation of this rule and keep members informed about any updates. The final rule has already been challenged in court by the Bank Policy Institute and the Kentucky Bankers Association, which could delay implementation.
For more information, please contact Gabriel Acosta at (202) 557-2811.
MBA Submits Comments on FDTA Proposed Rule
On Monday, MBA submitted comments in response to a joint proposed rule from federal agencies implementing the Financial Data Transparency Act of 2022 (FDTA). The purpose of this rule is to establish data standards to promote interoperability of financial regulatory data across nine federal agencies
Go deeper: While MBA supports the adoption of consensus-based industry standards, the proposed rule raises several concerns and questions about the methodology used by the agencies to designate various identifiers and terms as industry standards.
Why it matters: MBA requested that the agencies explain how they determine if a common standard is practicable and conduct a cost-benefit analysis of proposals before determining if they are practicable. As an example, MBA agrees with the designation of the Legal Entity Identifier as a standard because it is already widely used in the mortgage industry. MBA opposed the designation of the Financial Instrument Global Identifier as a standard because it is not widely used in the mortgage industry and would take considerable cost to adopt.
What’s next: MBA will continue to monitor this rulemaking process and communicate any updates to members.
For more information, please contact Gabriel Acosta at (202) 557-2811 or Rick Hill at (202) 557-2718.
MBA Urges FHFA to Update Its Master Condo Insurance Policy Deductible Guidelines
MBA recently submitted a comment letter to the Federal Housing Finance Agency (FHFA), advocating for crucial updates to Fannie Mae and Freddie Mac (the GSEs) guidelines on master condominium insurance deductibles.
The letter proposes increasing the current 5% deductible limit to 10% – or $50,000 per unit for all perils – and allowing actual cash value for older roofs. These changes would support homeowners associations and ensure continued access to financing for condominium ownership.
Why it matters: The 5% deductible limit on master insurance policies for condominiums has a significant impact on project eligibility for GSE financing. This limitation, especially in high-cost markets, escalates insurance costs for homeowners and strains homeowners associations. It also hinders affordability entry for first-time buyers and downsizing retirees. Revising these guidelines would enhance accessibility to GSE financing and support housing market affordability and stability.
What’s next: MBA will continue to engage with FHFA and the GSEs to advocate for these revisions and work toward practical solutions that sustain condominium lending. We also recognize these changes do expose the GSEs to incremental risks on condominium loans and want to work with them to mitigate those risks.
For more information, please contact John McMullen, AMP, at (202) 557-2706.
State Artificial Intelligence Policy Updates
Earlier this month an article by Liz Facemire, MBA’s Director of State Government Affairs, was published in the American Association of Residential Mortgage Regulator’s (AARMR) October The AARMR Regulator newsletter.
The article, “The Crucial Role of State Regulators in Shaping AI Policy for the Mortgage Industry,” details the important role regulators play in the conversation around artificial intelligence regulation for the mortgage industry.
Go deeper: This article serves as an important reminder to policymakers in the wake of Colorado enacting a broadly defined artificial intelligence law that will be reviewed as more states have active task forces on this issue and legislation pre-filing begins across the nation.
Why is this important: This AARMR newsletter reaches all state mortgage regulators and other industry influencers who all play important roles in the supervision and regulation of the mortgage industry. Mortgage regulators are familiar with the mortgage process and currently have laws, regulations, and the authority to examine the use of technology in the mortgage process. MBA’s intention is to urge industry regulators to leverage this experience in the artificial intelligence conversations in agency’s respective capitols.
What’s next: The MBA State Legislative & Regulatory Committee (SLRC) will be meeting in Denver, Colorado during the MBA Annual Convention and Expo on Sunday, October 27, 1:00-2:30pm MT in room 610-612.
This SLRC meeting will be hosting the Director of Legislative Affairs/ Senior Assistant Attorney General from the Colorado Office of the Attorney General to speak about SB 24-205, Consumer Protections for Artificial Intelligence, and their thoughts on enforcement. The meeting is open to all MBA members and will provide an opportunity for the Committee to seek greater clarity on how the law will be implemented.
For more information, please visit the MBA resource center mba.org/stateai or contact William Kooper (202) 557-2737 or Liz Facemire (202) 557-2870.
NMLS Users: Action Required in NMLS Accounts Prior to November 1st
MBA is reminding its members that improvements to the Nationwide Mortgage Licensing System (NMLS) system performed last summer require all NMLS users to go through the new log in process prior to November 1st.
All users and Mortgage Loan Originators (MLOs) – at depository institutions or independent mortgage banks – need to go through the new log in process for NMLS prior to renewal season. If users MLOs have not done so already, please ensure their log in to NMLS as soon as possible to complete the new login process.
Why it matters: The new login experience will require users to enter an account recovery email the next time they log in to NMLS, if users haven’t already done so. The Conference of State Bank Supervisors (CSBS) recommends that they use a personal email address that they will always have access to, regardless of user’s employer. This is important because NMLS will use the email address to help users retrieve their username and reset their password.
The new login experience will also require users to verify their social security number and date of birth to ensure the information is correct. Users only have to do this once.
NMLS users with multiple accounts should log in to NMLS and consolidate your accounts. This will allow them to maintain one set of credentials to access NMLS instead of tracking and storing multiple usernames and passwords, save time by having one username and password for all system access needs.
What’s next: MBA will continue to forward messaging around NMLS enhancements and work closely with members and CSBS to achieve needed improvements to the system and user experience.
For more information, NMLS users can visit the NMLS Enhancements page on the NMLS Resource Center or contact the NMLS Call Center at 1-855-665-7123.
Elevate Your Advocacy Experience at #MBAAnnual24
MBA’s Annual Convention and Expo began on Sunday in Denver, Colorado. Conference attendees, mark your calendars with the following events:
“Lunch with MBA’s Lobbyists” (10/28 from 12:30 PM-1:30 PM MT at The HUB EXPO)
Election Jeopardy (10/28 from 4:15 PM-4:45 PM MT on THE HUB Stage)
MAA-sponsored Ice Cream Social (10/29 from 3:00 PM to 4:00 PM MT at the MBA Booth #429 in THE HUB EXPO).
MBA’s Legislative and Political Affairs Team will also host its annual advocacy reception on Monday, October 28, from 5:00 PM-6:00 PM MT in the Bluebird Ballroom Foyer following an invitation-only candidate fundraiser event in support of House Financial Services Committee Member Congresswoman Brittany Pettersen (D-CO).
Why it matters: Following the November elections, the industry will face numerous public policy challenges and opportunities, including the expiration of many of the 2017 Tax Cuts and Jobs Act reforms and the potential for GSE reforms that could release Fannie Mae and Freddie Mac from conservatorship. These two policy battles alone could have seismic impacts on how our industry functions.
What’s next: There are 10 days remaining until the general election on Tuesday, November 5. Don’t forget to register for the next MAA Quarterly Webinar: Post-Election Briefing on Wednesday, December 4 from 3:00pm- 4:00pm ET, and hear from a panel of experts as they reflect on the outcome of the elections and how to prepare for what’s ahead at the federal level.
For more information, please contact Jamey Lynch, AMP at (202) 557-2818 or Margaret Ehrhardt at (202) 557-2708.
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:
Mastering MSR Valuations in a Shifting Marketplace – November 13
Manufactured Housing: An Emerging Multifamily Supply Solution – November 13
From Mortgage Eligibility to Affordability: Adapting Lending Strategies to Market Conditions – November 19
Transition Climate Risks: From Initial Assessment to Mitigation – November 20
Master the Art of Pricing and Rate Lock Strategies – December 10
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.
