MBA Advocacy Update: FHA Updates Guidance on Modernization of Engagement of Borrowers in Default
FHA Updates Guidance on Modernization of Engagement of Borrowers in Default
In response to MBA’s ongoing advocacy, the Federal Housing Administration (FHA) on Tuesday released a mortgagee letter (ML) that updates the requirements for engaging with borrowers in default and loss mitigation.
• The updated guidance provides additional clarification on the requirements for engaging with borrowers in default and better aligns with existing requirements, including the Consumer Financial Protection Bureau’s (CFPB) Regulation X servicing rules.
Why it matters: Last year, MBA led a joint trades letter calling for additional clarity to FHA’s 2024 policy providing alternatives to the “face-to-face” requirement for mortgage servicers meeting with borrowers in default as well as better alignment with existing requirements. The recently published ML responds to the feedback provided in the joint trades letter by:
• Providing additional clarification on what counts as a reasonable effort by a mortgage servicer to arrange an interview with a borrower in default; and
• Aligning compliance with existing early intervention requirements.
What’s next: MBA will work with members to surface any concerns and will help with implementation.
For more information, please contact Kait Hildner at (202) 557-2933.
Senate Authors Introduce VA Partial Claim Legislation
Recently, Senators Lisa Blunt Rochester (D-DE) and Mike Rounds (R-SD) introduced the Veterans Housing Stability Act of 2025 (S. 1921). The bill provides the Department of Veterans Affairs (VA) with statutory authority to do partial claims in order to help veterans avoid foreclosure.
Why it matters: After the House unanimously passed partial claims legislation (H.R. 1815) in May, the introduction of this Senate legislation adds to ongoing bipartisan congressional discussions about bringing the VA Home Loan program into alignment with FHA’s and Fannie Mae’s and Freddie Mac’s loss mitigation options for servicers.
What’s next: MBA will continue to work with congressional allies and coalition partners to advance partial claims legislation toward enactment.
For more information, please contact Ethan Saxon at (202) 557-2913 or George Rogers at (202) 557-2797.
Trump Administration Releases Additional Details on FY 2026 Budget Proposal
Last month, the Trump administration released additional details of its Fiscal Year (FY) 2026 budget proposal. Each year, the President’s budget request, otherwise known as its “wish list” which carries no force of law by itself, provides a blueprint for the Administration’s policy and spending priorities as Congress traditionally kicks off its appropriations process for the new fiscal year.
Why it matters: The proposed budget calls for a reduction in non-defense discretionary spending by 22%. However, the proposal would cut overall funding for the Department of Housing and Urban Development (HUD) by 44%.
Go deeper: Greater insight into the Administration’s housing policy agenda is limited without the ‘Analytical Perspectives’ section, which has not yet been released. However, below are highlights of areas of primary interest:
• FHA: The proposal includes $160 million for administrative expenses under the FHA Mutual Mortgage Insurance (MMI) Program – a $5 million increase over FY 2025 – to support core FHA functions such as loan underwriting, servicing oversight, claims processing, and risk management. The budget also preserves its $400 billion cap on the FY 26 loan guarantees for the Insurance Fund, which is consistent with past years and aligned with market demand.
• Ginnie Mae: The proposed budget requests $56 million for administrative expenses, a $11 million reduction from FY 2025. This reduction reflects a smaller staffing footprint, which may constrain Ginnie Mae’s issuer oversight capacity and modernization efforts at a time of growing concern for servicer liquidity due to rising delinquencies. The budget maintains $550 billion in commitment authority for Ginnie Mae’s Mortgage-Backed Securities program.
• VA: The budget proposes $134.6 billion in discretionary budget authority, a $5.4 billion increase over the 2025 enacted level. $327 million would be allocated to the VA Home Loan Guarantee program.
• USDA: RHS Section 502 single-family housing guarantees are requested at a $25 billion annual volume level. The subsidy rate for FY 2026 remains negative, resulting from the combination of annual and upfront fees, indicating that the program is a net revenue generator for the federal government.
• CFPB: As an independent agency, the Appendix acknowledges that funding for the CFPB’s operations is obtained primarily through the Federal Reserve System. However, the budget proposes a $40 million increase in the CFPB’s authority. Though the proposal notes an increase in personnel, the Administration’s planned staffing reductions remain halted by legal proceedings.
What’s next: As is customary, MBA is engaging with leaders at the federal housing agencies and the Congress on FY 2026 appropriations and funding levels. We have been encouraged by their receptiveness and commitment to maintaining and/or promoting new effective solutions that bolster housing supply, improve affordability for both renters and borrowers, increase access to sustainable homeownership, and lead to positive outcomes for its members and their businesses.
For more information, please contact Bill Killmer at (202) 557-2736 and Brendan Kelleher at (202) 557-2779.
MBA Submits Letters to Key House Appropriations Subcommittees on VA, RHS Programs
Last week, MBA submitted letters in advance of markups by the House Appropriations Subcommittees on Military Construction, Veterans Affairs (VA), and Related Agencies and Agriculture (USDA), Rural Development, FDA, and Related Agencies regarding Fiscal Year (FY) 2026 funding levels. Those individual letters signed by MBA’s SVP and Chief Lobbyist Bill Killmer may be found here and here.
Why it matters: The letters are vehicles for MBA to continue to emphasize key policy priorities with House appropriators for the VA Home Loan and Rural Housing Services (RHS) programs – in the context of proposed funding levels for the VA and the USDA.
For example, USDA’s RHS sub-agency has yet to implement delegated underwriting (or “direct endorsement”) authority enacted in 2016 for lenders participating in the Section 502 Single Family Housing Guaranteed Loan Program. And the Veterans Benefits Administration (VBA) should be encouraged to identify for the Congress the resources needed to appropriately fund a permanent partial claim program – particularly now in the wake of House passage in May of authorizing legislation (H.R. 1815, which is now before the Senate for consideration).
What’s next: MBA will continue to advocate – with both House and Senate appropriators – for these key priorities to be identified and appropriately funded as the FY26 budget and appropriations debate unfolds in the coming weeks and months.
For more information, please contact Madisyn Rhone at (202) 557-2741 or Rachel Kelley at (202) 557- 2816.
Acting Comptroller Hood Details Current Banking Industry Regulatory Landscape
Last Tuesday, Acting Comptroller of the Currency Rodney Hood delivered a speech at the U.S. Chamber of Commerce Capital Markets Forum where he discussed several policy issues affecting the banking industry. The Acting Comptroller highlighted the Office of the Comptroller of the Currency’s (OCC) efforts to expedite bank-fintech partnerships, encourage engagement with the digital asset industry, advance financial inclusion, and reform existing regulations to promote economic growth. His speech touched on initiatives to promote growth in the banking system, across all asset sizes, including:
• The withdrawal of the OCC’s proposal on climate-related risk management principles for large banks, and
• Efforts to cease examining for “reputation risk.”
On Basel III implementation, the Acting Comptroller noted “…that the U.S. proposal had gone beyond what was necessary” and reiterated his commitment “…to a capital framework that supports resilience—but does not constrain growth.”
The Acting Comptroller added that supplementary leverage ratio (SLR) reform is being discussed, and the SLR should function as a backstop while not unnecessarily restricting lending.
Why it matters: Last fall, MBA agreed with Federal Reserve leadership that a re-proposal of the Basel III endgame was necessary. In MBA’s 2024 comment letter, as well as in its recent letter to the Trump administration’s banking agency leaders, MBA continues to emphasize the need for action to reduce the excessive risk weightings for mortgage servicing assets and warehouse lending exposures in order to strengthen critical banking sector support for the mortgage market.
What’s next: MBA will continue to monitor the implementation of Basel III standards and SLR reform to ensure our members’ voices are adequately reflected in the respective final proposals.
For more information, please contact Fran Mordi at (202) 557-2860.
HUD Proposes Rescission of Affirmative Fair Housing Marketing Regulations
Last Tuesday, HUD proposed a rescission of the Affirmatively Furthering Fair Housing (AFFH) Marketing regulations. This follows an Interim Final Rule issued in early March to return to the original understanding of AFFH, establishing that HUD grantees must agree to a general commitment to promote fair housing.
Why it matters: A rescission of this policy would remove the requirement that participants using FHA multifamily and certain other HUD housing programs complete and submit a form outlining its affirmative fair housing marketing plan. Program participants should continue to affirmatively further fair housing to the extent required by the Fair Housing Act.
What’s next: MBA is committed to fair and equitable access to credit. MBA also agrees with HUD’s determination that the existing AFFH compliance procedures are extensive and burdensome. Comments to HUD are due by July 3, 2025.
For more information, please contact Darnell Peterson at (202) 557-2922.
State Artificial Intelligence Legislation Updates
As more state legislative sessions enter their final days, MBA continues to engage on and track the fate of hundreds of state Artificial Intelligence (AI) bills. While more than half the states have adjourned for the year, a few states continue to work on problematic bills with flawed and ill-defined AI-related language.
• For example, California’s AB 1018 and SB 420 were voted out of their house of origin this week ahead of the state’s “crossover” deadline today. See next news item below for more information.
Other key state updates: The Texas Legislature passed a narrower and more focused AI bill, HB 149, which was introduced to replace the more troubling version in HB 1709. Texas HB 149 now awaits Gubernatorial action.
• Connecticut’s session ended at midnight on Wednesday, and, despite having two efforts – one introduced by the Governor (SB 1249) and the other a re-introduction of last year’s legislation (SB 2) – neither advanced through the Legislature before adjournment.
• New York has several pieces of AI legislation and recently amended a bill targeting the financial services industry, A773B. The newest version of A773B is now focused on a smaller sector of the financial services industry and excludes those, like mortgage lenders, who are already under sufficient or more stringent regulation.
What’s next: MBA continues to support its state partners efforts to educate state law makers on the unintended consequences of these AI efforts, reminding legislators that the use of technology does not change a mortgage lender’s responsibility under both state and federal fair lending and anti-discrimination laws, and data privacy/security rules.
For more information, please visit the MBA resource center mba.org/stateai or contact Liz Facemire at (202) 557-2870 or Gabriel Acosta at (202) 557-2811.
MBA and California MBA Respond to CPPA Proposed Regulations on Auto Decision Technology
Last Monday, MBA and the California MBA (CA MBA) responded to proposed regulations from the California Privacy Protection Agency (CPPA) that would improperly regulate the use of AI in the state. The proposal would regulate many systems developed or authorized by the federal government, including automated underwriting systems and credit scoring models, and require lenders to offer consumers the opportunity to opt-out of consideration by these systems and implement a manual appeals process for denied borrowers. Importantly, these proposed rules ignore the fact that the California Privacy Rights Act (CPRA) does not apply to data subject to the Gramm-Leach-Bliley Act (GLBA) or the Fair Credit Reporting Act (FCRA).
• The proposed rules, if finalized, would create substantial operational difficulties for financial institutions and minimal benefits, if any, to consumers.
Go deeper: The letter asks the CPPA to clarify that the proposed rule does not apply to decisions made or facilitated involving data that is subject to the GLBA or FCRA exemption under the CPRA. Data subject to these laws are exempt from regulation by the CPPA and should similarly not be regulated under the proposed rule.
What’s next: MBA will keep members informed about any updates to these proposed regulations.
For more information, please visit the MBA resource center mba.org/stateai or contact Liz Facemire at (202) 557-2870 or Gabriel Acosta at (202) 557-2811.
MBA-Opposed IMB CRA Legislation Passes California Assembly with Divided Vote; Industry Advocacy Now Shifts to State Senate
Earlier this week, California legislation (AB 801) to impose a state-level Community Reinvestment Act (CRA) framework specifically on independent mortgage banks (IMBs) was passed by the Assembly. While the bill received support from 45 representatives, it was opposed by 15 members; an additional 19 members did not vote.
This significant weakening of support is the direct result of industry advocacy by MBA, the California MBA, and Mortgage Action Alliance (MAA) members in California who responded to a Call to Action in recent weeks to urge “no” votes from their Assembly members in Sacramento.
Go deeper: CRA would add new compliance obligations that are unnecessary, redundant, and damaging. Even more alarming, the bill authorizes the Department of Financial Protection and Innovation (DFPI) to impose administrative penalties of up to $100,000 for failing to comply with these new requirements.
Why it matters: Subjecting IMBs to costly new CRA obligations is unwarranted given that these companies clearly lead the market in serving low- and moderate-income borrowers and minority communities (see the MBA-sponsored report by the Urban Institute for national and state data).
What’s next: AB 801 will now be considered by the California Senate, and MBA and the California MBA will continue to emphasize how this legislation would disrupt the IMB business model, drive up mortgage lending costs, and make the affordability crisis worse for CA homebuyers. MAA members in the state should anticipate that a Call to Action will be issued in the weeks ahead to ensure senators understand the harmful impacts of this bill from their constituents.
For more information, please visit the MBA State CRA Resource Center or contact William Kooper at (202) 557-2737 or Liz Facemire at (202) 557-2870.
For more information about the MAA alert, please contact Jamey Lynch, AMP at 202-557-2818 or Margie Ehrhardt at (202) 557-2708.
Participate in MORPAC Action Week, June 23-27!
On June 23, MORPAC, MBA’s Political Action Committee, officially kicks off its annual Action Week. As the only federal PAC that represents the entire real estate finance industry, MORPAC provides access to candidates who will shape policies that impact MBA members.
• MORPAC is aiming to raise $225,000 during the 2025 Action Week – from at least 20 participating member companies.
• We need your help! Sign up now to make a bigger impact by running a MORPAC campaign and encourage your employees to directly participate in the political process.
Why it matters: MORPAC is a powerful tool for driving policy change, providing MBA members with a platform to amplify their voice, educate decisionmakers, and channel financial resources to support pro-industry candidates and advance MBA’s legislative agenda.
What’s next: If you are interested in getting involved during MORPAC Action Week, please fill out this link.
For more information, please contact Erin Reilly at 202-557-2751.
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:
• Getting to Accept – Using Loan Product Advisor to Your Advantage – June 25
• Can You Pay That? Navigating LO Compensation, Competition, and Compliance in 2025 – June 26
• AI on Trial: Fair Lending, Compliance, and the Fight for Transparency in Mortgage Lending – July 9
• Bank-Owned Mortgage Divisions: What Bankers Need to Know to Manage Mortgage Banking – July 21
• Legal Duties to Prevent Fraud and Opportunities to Safeguard the System – Aug. 6
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.
