MBA State Relations Committee Update Federal Highlights

Advocacy News and Information from the Latest Issue of the MBA State Relations Committee Update

FHFA Responds to MBA’s Recommendation; Rescinds Advisory Bulletin on UDAP Prohibitions: Last Monday, Federal Housing Finance Agency (FHFA) Director Bill Pulte released an order that rescinds Advisory Bulletin 2024-06: “Regulated Entity Unfair or Deceptive Acts of Practices Compliance,” which required Fannie Mae and Freddie Mac (the GSEs) to certify compliance with Unfair or Deceptive Acts or Practices (UDAP) laws, including by conducting consumer compliance reviews of their seller-servicers. MBA has consistently advocated for this rescission since the Bulletin was posted in November 2024, meeting with FHFA staff during the previous Administration as well as communicating its concerns to Director Pulte. MBA's President and CEO Bob Broeksmit, CMB, released a statement in support of the rescission, stating that “the November bulletin’s specific expectations for Fannie Mae and Freddie Mac (the GSEs) to conduct consumer protection oversight of their customers wrongly established the GSEs as compliance regulators, was duplicative of federal and state regulatory oversight of UDAPs, and would have negatively impacted consumers and lenders through higher costs.” He added, “Common sense regulation and oversight is crucial to ensuring that the GSEs operate in a safe and sound manner that allows them to continue their pivotal role in providing affordable homeownership and rental housing opportunities for all Americans.” In the order, Director Pulte stated that FHFA is not the primary administrator of UDAP prohibitions. Instead, the Federal Trade Commission has the authority to issue interpretive rules and policy statements pertaining to UDAP authority. MBA will continue to monitor this issue and will keep members updated.

FHA Revises Borrower Eligibility Requirements: Last Wednesday, the Federal Housing Administration (FHA) issued Mortgagee Letter 2025-09 (ML), implementing significant changes to the residency requirements for applicants seeking FHA-insured mortgages. The update eliminates eligibility for non-permanent resident borrowers to apply for FHA-insured mortgages. Additionally, the ML revises and clarifies requirements for permanent resident borrowers in the FHA Single Family Housing Policy Handbook. The provisions of this ML may be implemented immediately but must be implemented for FHA case numbers assigned on or after May 25, 2025. The ML follows a recent announcement by the Department of Agriculture Rural Housing Service (RHS), which rescinded its temporary authority allowing certain non-U.S. citizens, including DACA recipients, to apply for a guaranteed loan. However, the ML goes even further by prohibiting all non-permanent residents, including H-1B visa holders, from obtaining an FHA-insured mortgage. MBA believes FHA’s bulletin is overreaching because it precludes legal residents such as long-term employment-based visa holders who have a high propensity to transition to green card holders and naturalized citizenship from obtaining mortgage financing. These households are important to local economies as skilled workers and taxpayers and have been eligible for mortgage financing for decades. MBA is gathering feedback from members to evaluate the full impact of this policy shift, including its effects on loan production and industry compliance. This topic will be discussed during next Wednesday’s Residential Loan Production Committee call.

FHFA Director Announces Changes to GSE-supported SPCPs and the EHFPs: Last week, FHFA Director Pulte announced changes to policy related to Special Purpose Credit Programs (SPCPs) and the Equitable Housing Finance Plans (EHFP). Via a post on his X account, Director Pulte issued a directive terminating the GSEs’ support of SPCPs, stating that the current level of support for these programs is inappropriate for regulated entities in conservatorship. The directive provides pipeline protection for SPCP loans in process by allowing the GSEs to comply with any existing contractual obligations related to these programs.  In a another X post, Director Pulte issued a waiver that removes the GSEs’ obligations to comply with portions of the Fair Lending, Fair Housing, and Equitable Housing Finance Plans (EHFP) final rule. The final rule codified the requirements and processes for the EHFPs. The newly issued wavier removes the requirement for the GSEs to develop, adopt, publish, and report on those plans. The waiver states that this step supports FHFA's review and consideration of best efforts to ensure the GSEs are meeting their public mission as outlined in their charters and in the Safety and Soundness Act. MBA continues to support legally compliant SPCPs as useful tools to address persistent homeownership barriers. MBA also obtained clarification that lender-supported SPCPs (those without GSE financial support or variances) that meet standard underwriting criteria are still eligible for sale to the GSEs. Similarly, MBA believes properly executed initiatives in the EHFPs can provide useful public roadmaps for GSE efforts to promote affordable housing and create more sustainable homeownership opportunities. SPCPs and the EHFP are important tools that advanced the GSEs’ mission of supporting affordable housing opportunities for hardworking American families. MBA will continue to monitor all directives and orders issued by FHFA and will continue to engage with them and the GSEs to find solutions to meet affordable housing needs.

MBA, Trades Encourage Adoption of FHA Loss Mitigation Guardrails: Last Monday, MBA, along with the Housing Policy Council and Gate House Strategies, submitted a joint trades letter that urges FHA to impose additional measures to limit serial forbearance and modification requests and establish sustainable borrower performance. Specifically, the letter recommended that FHA adopt two measures for borrowers: a cap of one loss mitigation every 18 months and a required Trial Payment Plan for all permanent retention options. The groups believe these measures would strengthen the Mutual Mortgage Insurance Fund, reduce redefault rates, and preserve borrower equity for those whose hardships are too severe to recover from. Implementing additional safeguards and applying them to FHA’s COVID-19 Loss Mitigation Recovery Waterfall will enable FHA to assess the long-term effectiveness of its loss mitigation program before servicers prepare to implement FHA’s new waterfall in February 2026. MBA will monitor and communicate developments to members.

Attend MBA’s National Advocacy Conference on April 8-9; Over 500 Advocates Registered: Join us in Washington, D.C. to meet with key policymakers, connect with industry colleagues, and hear from policy experts on the topline issues impacting the industry. Advocacy topics will include housing tax policy, trigger leads, the potential for a Fannie/Freddie conservatorship release, legislation to increase housing supply, technology-related issues, the cost and availability of insurance, and more. Currently scheduled speakers for the conference include HUD Secretary Scott Turner, House GOP Conference Chair Rep. Lisa McClain (R-MI), key Senate Banking Committee members Elizabeth Warren (D-MA) and Mark Warner (D-VA), key House Financial Services Committee members Mike Flood (R-NE), Ritchie Torres (D-NY), and Emmanuel Cleaver (D-MO), and National Journal’s managing editor of Hotline Kirk Bado. An exclusive reception will be held on Tuesday, April 8, at the Renwick Gallery of the Smithsonian American Art Museum. Lend your voice to the discussion and bring your industry experience to the table. Check out MBA’s group passes pricing. Your participation at NAC ensures that lawmakers of the 119th Congress and the administration understand the real-world impacts of proposed legislation on your employees, your end users, and the communities you serve. MBA will use your participation during NAC25 to help amplify its advocacy on issues – both residential and commercial/multifamily – that directly impact our industry.

HFSC Holds Hearings on CFPB Oversight and Capital Access: Last week, the House Financial Services Committee (HFSC) held two key hearings: a full Committee hearing on Tuesday titled, “Beyond Silicon Valley: Expanding Access to Capital Across America,” and a Wednesday Subcommittee hearing titled, “A New Era for the CFPB: Balancing Power and Reprioritizing Consumer Protections.” Lawmakers at Tuesday’s hearing largely agreed on the need to modernize the definition of an accredited investor, citing structural changes in capital markets and a desire to expand access to wealth-building tools. Several Democrats also called for increased support for Community Development Financial Institutions (CDFIs) to improve investment in underserved communities. Last Wednesday’s CFPB-focused hearing exposed sharp partisan divides. Republicans raised concerns about what they described as unchecked regulatory overreach under the Biden administration, pointing to the Bureau’s independent structure and its enforcement of rules such as Section 1071 on small business lending data collection. Multiple GOP members called for structural reforms and a rollback of certain regulatory mandates. Democrats, meanwhile, strongly defended the CFPB’s mission, emphasizing its role in consumer protection and oversight of nonbank financial institutions. Several warned that the Trump administration’s early actions—including enforcement slowdowns and staffing cuts—could undermine the Bureau’s effectiveness moving forward. Find the full HFSC hearing summary here, and the full Subcommittee hearing summary here. Both hearings previewed potential legislative activity—particularly efforts to reshape the CFPB’s structure, authority, and oversight mechanisms. Several bills noticed during the hearings are expected to be taken up in a full Committee markup as early as next week. MBA supports the concept of changing the CFPB to a bipartisan board or commission structure and subjecting the agency to the appropriations process. MBA will remain fully engaged with lawmakers on both sides of the aisle. As discussions around CFPB reform and capital access continue to evolve, MBA will provide updates and weigh in with the industry’s perspective.

CFPB Seeks to Vacate Recent IMB Redlining Settlement: Last Wednesday, the CFPB announced that it is seeking to vacate and set aside a $105,000 judgment against Townstone Financial, a Chicago mortgage broker accused of redlining. “CFPB abused its power, used radical ‘equity’ arguments to tag Townstone as racist with zero evidence, and spent years persecuting and extorting them…The more we uncover at CFPB, the more we see how this agency was weaponized against targeted Americans,” said CFPB Acting Director Russ Vought. The CFPB moved to vacate the settlement, stating that Townstone was “targeted” for protected free speech and for perceived racial disparities because of a failure to meet a “de-facto mortgage quota” in a majority-minority area. Additionally, the CFPB found there was a lack of evidence of any potential customers reporting Townstone to them. Importantly, the Court’s decision last year did not address many of the arguments raised by Townstone Financial or by MBA in its amicus brief. MBA argued that the anti-discouragement provision of Regulation B is invalid because it is inconsistent with the plain text of ECOA. MBA also suggested two limiting principles if the Court found that the anti-discouragement provision was in fact valid. First, the Bureau should be required to prove that a lender affirmatively discouraged an applicant on a prohibited basis. Second, the Bureau should be required to prove that a discouraging statement caused identifiable applicants to be discouraged from applying. The CFPB did neither in the Townstone case. MBA will monitor and provide any relevant updates on this case as well as other CFPB activities.

MBA, Trades Provide Recommendations for FHFA’s Credit Score Models and Reports Initiative: Mid-March, MBA and several trades sent a letter to FHFA with recommendations for its ongoing Credit Score Models and Reports Initiative. After launching more than two years ago, the initiative, as currently defined, is overly complex, costly to consumers, and missing key requirements that are necessary for a successful transition. The letter urges FHFA leadership to reevaluate portions of the initiative to make successful progress towards credit score modernization for the GSEs. Five critical steps are required in order to establish a viable implementation plan: commit to data transparency and share; conduct a cost/benefit analysis and operation impact assessment; re-evaluate the bi-merge option; coordinate with prudential regulators; and align with government lending programs. The implementation of the new credit score models, and a transition to bi-merge, has multiple and wide-raging impacts. A well-coordinated and appropriate execution strategy is needed to minimize disruption to the housing finance system. MBA will continue to work with incoming leadership at FHFA and other trade associations to establish a workable implementation plan to ensure that unintended consequences are mitigated and that costs, complexity, consumer impact, and policy implications are taken into consideration throughout this initiative. 

Federal Reserve Keeps Rates Unchanged: The Federal Reserve held the federal funds rate at a target range of 4.25-4.50% on Wednesday. Read more of MBA SVP and Chief Economist Mike Fratantoni’s commentary here.

FHA Reverses Reconsideration of Value Policy: Thursday, March 20, the Federal Housing Administration (FHA) issued Mortgagee Letter 2025-08, rescinding recent policy changes related to its Reconsideration of Value (ROV) process. The letter eliminates the borrower-initiated ROV process and restores prior policy, placing the responsibility for initiating an ROV on a mortgagee.  Mortgagees may request an ROV when the appraiser did not consider information that was relevant as of the appraisal’s effective date. In such cases, mortgagees must provide all relevant data to the appraiser. Appraisers are permitted to charge an additional fee if the relevant data was not available at the time of the original appraisal. However, borrowers cannot be charged for this fee unless the unavailability of the data was due to their own actions​. MBA expects FHFA to adjust its policies for the GSEs to align with FHA. MBA will continue to provide updates on this issue through the Residential Loan Production Committee.

USDA Ends Home Loan Eligibility for Some Non-U.S. Citizens: On Tuesday, March 18, the Department of Agriculture (USDA) announced it is ending a temporary policy that allowed certain non-U.S. citizens to apply for home loans through the Rural Housing Service. This special eligibility, which began on April 29, 2022, officially ended on March 18, 2025. During this period, some non-U.S. citizens, including certain DACA recipients, had been eligible to apply for a USDA-guaranteed loan if they met specific criteria, such as lawful presence in the U.S. and other program requirements. The termination of temporary USDA loan eligibility for DACA recipients aligns with the Trump administration's broader agenda to restrict federal benefits for individuals without permanent legal status. MBA expects the FHA and FHFA to adjust their policies to align with USDA. MBA will continue to provide updates on this issue through the Residential Loan Production Committee.

MBA Files Amicus Brief with Supreme Court Addressing “Uninjured” Class Members in Class Action Lawsuits: On March 12, MBA submitted a joint trades Amicus Brief in Laboratory Corp. of America v. Davis with the U.S. Supreme Court. While the case is not mortgage related, the Supreme Court will decide “[w]hether a federal court may certify a class action pursuant to Federal Rule of Civil Procedure 23(b)(3) when some members of the proposed class lack any Article III injury.” Some Circuits recognize that since a concrete injury is a threshold requirement to get in the federal courthouse door, then uninjured plaintiffs, who could not get through the door suing individually, should not be permitted to litigate as members of a class, either. Other Circuits, including the Ninth (from which Laboratory Corp. originates), allow courts to certify class actions even when it is undisputed that class members with no injury stand to recover windfall damages. This case could have a significant impact in reducing burdensome class action cases faced by MBA member companies. Essentially, a favorable ruling in this case would require courts to filter out “uninjured” class members far earlier than they do currently. While it is accepted that a class member that does not have a concrete injury (beyond a statutory injury) is not eligible for relief, the fact that some courts do not conduct the inquiry until after class certification creates immense coercive pressure to settle and is an abuse of the court’s jurisdiction. This is a high-stakes issue given the frequency of class action litigation in the mortgage banking industry. As heavily-regulated entities subject to an array of consumer-protection statutes, IMBs, banks, and credit unions routinely risk massive liability in class actions for technical violations that produce no harm. Similarly, many suits are brought by named plaintiffs with dramatic claims of harm (like homes lost to foreclosure) but seek to represent others with no such harm. The MBA-led amicus brief demonstrates that the current inequitable rules have created real harm for those that are forced to litigate class actions.  Moreover, in light of the perception of relaxed federal enforcement of consumer financial laws, it is anticipated there will be an increase in class actions from private plaintiffs. This case provides a great opportunity to rationalize the class certification rules now. MBA would like to thank the team at Goodwin for preparing this Amicus Brief. MBA will monitor and inform members when a decision is reached.