MBA State Relations Committee Update Federal Highlights

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

CFPB Releases Anticipated RFI on Mortgage Closing Costs; MBA Shares Concerns Regarding Credit Reporting Price Increases

The Consumer Financial Protection Bureau (CFPB) released its anticipated Request for Information (RFI) “Regarding Fees Imposed in Residential Mortgage Transactions.” The RFI seeks input from industry participants, consumers, and others on “the impact closing costs have on borrowers and the mortgage market,” citing, among other things, the rising costs for credit scores, credit reports, title insurance, and employment verification. Read MBA’s summary here. The RFI follows a March 2024 White House fact sheet and CFPB blog post on “lowering closing costs for home mortgages,” including the possibility of pursuing rulemaking and guidance to address purportedly “anticompetitive closing costs imposed by lenders on homebuyers and homeowners.” While the RFI contains no specific policy proposals, MBA in press statements (here and here) and speeches made by MBA President and CEO Bob Broeksmit, CMB, (including at the Exchequer Club and at #MBASecondary24 earlier this month) has been critical about the CFPB’s consistent, illogical use of the term ’junk fees’ as it pertains to mortgage closing costs. Most of the fees the CFPB cites are required by the safety and soundness standards of the GSEs, federal guarantors and banking regulators. They also protect taxpayers and consumers and are fully disclosed to borrowers before they are committed to proceed with an application. The CFPB itself has praised the federal disclosure regime – put in place at considerable cost to lenders just a decade ago – for protecting consumers and promoting shopping. While MBA supports efforts to reduce the cost of these services, concern remains about misguided or politically motivated proposals that would end up increasing costs, diminishing competition, and/or reducing credit availability. MBA has been vocal about the sharply rising costs of credit reports and other credit reporting products and is pleased that the RFI specifically provides an opportunity to share concerns about the factors driving these pricing changes amidst challenging market conditions for lenders of all sizes and business models. Shortly after the RFI was released, MBA led a joint press statement with the American Bankers Association and Housing Policy Council that stated, among other important points: “If the CFPB is now modifying its previous position and is considering changing this complex regulatory disclosure regime, a rule-making process governed by the Administrative Procedure Act – and supported by a robust cost-benefit analysis – is the only appropriate vehicle to initiate that work. Such a rule-making process would allow for the proper level of engagement to produce changes that benefit consumers and do not add compliance costs and lead to negative unintended consequences.” MBA welcomes the opportunity to respond to the CFPB’s RFI and will work with members to provide an in-depth overview on mortgage closing costs, including answering the nine questions posed. Comments are due August 2, 2024.

VA Announces Years-END, Targeted Foreclosure Moratorium

The Department of Veterans Affairs (VA) announced a targeted (and voluntary) foreclosure moratorium to December 31, 2024. The announcement effectively extends the current moratorium – which was originally announced last November – while servicers continue to implement the Veterans Affairs Servicing Purchase (VASP) Program by October 1st. VASP policy guidance was formally announced in a separate Circular here. The VA also extended the temporary COVID-19 Home Retention Options to September 30th – the Loan Deferment, Disaster Extend Modification, and the COVID-19 Refund Modification. VASP, which formally “launches” today, allows the VA to offer loss mitigation assistance to Veterans in today’s high-interest rate environment by purchasing a below-market modification from the servicer at 2.5%. The VA’s announcement was expected, unsurprising, and follows direct engagement from the MBA with VA’s leadership on the VASP program. Earlier in May, MBA delivered a letter to the VA expressing concerns with the implementation of VASP given the lack of sufficient details available. Specifically, MBA expressed concern with improper expectations regarding the availability of the program to Veterans and the public, as well as requesting additional implementation once complete guidance was provided. Now, VA is hosting weekly calls to calls with the industry to collaborate and resolve the issues most important to implementing the VASP program and VA’s new mandatory loss mitigation waterfall. According to the VA’s announcement, a servicer should not proceed with foreclosure unless:

  • The property is vacant or abandoned;
  • The borrower does not wish to retain homeownership;
  • The servicer has not received a monthly payment for at least 210 days and the borrower is unresponsive to the servicer’s outreach attempts; or
  • The servicer has evaluated the borrower for all home retention options but has determined that no home retention option, including VASP or alternative to foreclosure, will work for the borrower.

The MBA will continue to monitor and communicate developments on the VASP program, including the servicing transfers work, which is expected to begin next week.

FHFA, GSEs Enhance Flex Modification

The Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the GSEs) have updated their Flex Modification policies to help more borrowers facing permanent financial hardship to achieve payment reduction. The Flex Modification has long been the GSEs’ flagship home retention solution to help borrowers preserve affordable homeownership. The long-awaited announcement follows efforts by FHFA and the GSEs to consider improvements to the program to provide more meaningful payment relief to borrowers and create a durable program responsive to borrowers in different economic environments. In January 2023, MBA advocated for FHFA and the GSEs to consider enhancements following lessons learned from the COVID-19 pandemic. Moving forward, servicers will determine a borrower’s terms for the Flex Modification by incrementally applying the required steps to achieve a targeted Principal and Interest (P&I) reduction:

  • Reduce the borrower’s rate (if eligible);
  • Extend the mortgage in monthly increments up to 40 years; and
  • Forbear principal for borrowers with a mark-to-market-loan-to-value ratio greater than 50% (this was previously 80%).

Servicers can implement these enhancements as early as November 1, 2024, but no later than December 1, 2024.

FHA Provides Servicers Some Relief from Show Me

The Federal Housing Administration (FHA) announced – in an FAQ – that servicers can request reimbursement of attorney’s fees for judicial foreclosures in states where a non-judicial foreclosure is the preferred method of foreclosure, but a servicer instead decided to proceed judicially due to the presence of an FHA subordinate lien. The clarification follows long-awaited action by FHA – and advocacy by MBA – to address some of the challenges created by the U.S. Court of Appeals for the 8th Circuit holding in Show Me State Premium Homes vs. McDonnell. As a reminder, Show Me held that a subordinate lien held by the United States – such as an FHA Partial Claim – must be foreclosed by judicial action. As a result of the persuasive authority of the 8th Circuits’ holding, Show Me created a national logjam requiring FHA servicers to proceed judicially on FHA Partial Claims – a process that is more time consuming and costly for both servicers and FHA – than the non-judicial process. While MBA appreciates FHA’s important guidance, the announcement is not a direct policy solution to Show Me that would allow servicers to comply with the Reasonable Diligence schedules (foreclosure timelines) outlined in FHA’s Handbook. Such a solution may require Congressional action. MBA will continue to advocate for a policy solution by FHA to address the concerns from Show Me.

VA Responds to MBA's Advocacy; Will Address Buyer Commission Prohibition by June 12

During a government lending session at #MBASecondary24, U.S. Department of Veterans Affairs Deputy Director for Policy Michelle C. Corridon announced that the VA will release a circular by June 12 to address the buyer commission prohibition. The circular will be in place while a formal rulemaking process occurs. MBA has long advocated for such a move, including in a letter sent to the VA on April 3, 2024: "As we have previously stressed in our discussions on this issue, MBA urges the VA to amend its regulations to allow Veteran borrowers to pay reasonable and customary fees and commissions to retain agents that will represent their interests in the transaction,” the letter said. For months, MBA has been engaged with the VA, Fannie Mae and Freddie Mac (the GSEs), the Federal Housing Finance Agency (FHFA), and the Federal Housing Administration (FHA) to identify possible guideline clarifications or changes that may be needed because of new real estate agent compensation arrangements that might arise from the National Association of Realtors®(NAR) commissions litigation. Previously, FHA and the GSEs provided confirmation to MBA and NAR that seller payments directly to buyer agents would not count toward caps on interested party contributions. MBA will continue its advocacy on this issue and is assessing market developments for other changes that may be needed in agency guides and Consumer Financial Protection Bureau (CFPB) rules to ensure any new agent compensation arrangements do not limit access or raise the cost of mortgages.

MBA Pushes for Additional Details Regarding Freddie Mac's Closed-End Second Mortgage Proposal

MBA sent its letter to FHFA in response to a new product proposal from Freddie Mac that would allow them to purchase certain closed-end second mortgages. The letter highlights the possible benefits for both borrowers and lenders as well as concerns regarding potential harm to the existing market. Most importantly, the letter stresses the need for additional information in the proposal such as pricing details, information on expected volume or volume caps, and UMBS implications necessary to effectively evaluate the impact of introducing the new product. MBA urges the FHFA to request additional information and further evaluate the issues raised in our comments prior to considering approval. MBA was pleased to see that this proposal will be following the process established in FHFA’s New Products and Activities Final Rule. While the proposal outlines the basic parameters of Freddie Mac’s proposed new product, there are several critical details that remain unknown making it difficult to fully assess its potential impacts and benefits. The proposal will continue to be subject to criticism, particularly from congressional Republicans (e.g., see recent GOP letter here). MBA plans to request the opportunity to meet with FHFA to discuss the questions raised in the letter.

Ginnie Mae Announces E-Note Flexibility, Recovery Planning Requirements at #MBASecondary24

Ginnie Mae announced that it will now allow both digital and paper collateral to be commingled in pools starting with June 1, 2024, issuances. The introduction of commingling is intended to promote liquidity and further increase participation in the Digital Collateral Program. This change also supports HUD’s Strategic Plan with respect to the modernization and digitalization of the Ginnie Mae Mortgage-Backed Securities (MBS) program. Ginnie Mae also announced mandatory recovery planning requirements for non-depository issuers with Ginnie Mae servicing portfolios of $50 billion or greater at the end of the calendar year. The plans must include information related to an issuers organizational structures and technology systems to provide and are intended to help Ginnie Mae uphold its explicit government-backed guaranty should an issuer fail to meet their obligations. Issuers will be required, every two years, to update and resubmit their recovery plans or attest that the most recently approved recovery plan remains current. The initial recovery plans for the calendar year 2024 are due no later than June 30th, 2025. Details can be found in APM 24-08. Additional details on commingling can be found in APM 24-07 and Ginnie Mae will publish an updated eGuide reflecting this change and providing further updates. Digital Collateral will continue to be eligible for the same pool types for which they are currently eligible, as published in Ginnie Mae's Digital Collateral Guide. Both initiatives reflect MBA’s ongoing work with Ginnie Mae to address program modernization, improve liquidity, and strengthen issuers without imposing undue burdens.

Federal Reserve Vice Chair for Supervision Gives Speech on Bank Capital and Building a Resilient Regulatory Framework

Federal Reserve Vice Chair for Supervision Michael Barr gave a speech at the 28th Annual Financial Markets Conference on bank capital, liquidity and long-term debt rules. Of particular interest on Basel III Endgame proposal, Barr noted that regulators intend to make substantial changes; however, he did not give specifics as to when the rule will be finalized or if they will re-propose it. He also stated that regulators are focused on requiring big banks to maintain discount window capacity and that regulators are in the process of reviewing comments to the proposal on long-term debt rules. MBA and its members have substantial concerns that, without significant changes, the proposal will undermine real estate finance market stability, further diminish housing affordability, and reduce the opportunities that consumers have to access mortgage credit – particularly among first-time homebuyers and in communities that are traditionally underserved. Read MBA’s January 2024 comment letter here. The banking agencies are expected to release the results of a belated quantitative impact study (QIS) and possibly seek comment on those results. MBA continues to raise concerns with the proposal in meetings with the banking agencies and the Treasury Department and will be prepared to comment on the QIS.

MBA Encourages Servicing Policy Collaboration

MBA encouraged FHFA to provide greater transparency in the development of servicing policy by the GSEs, requesting that they create a process to evaluate written drafts of proposed guidance for instances where the GSEs seek to align their servicing guidance. MBA’s request continues our longstanding advocacy to promote greater collaboration and transparency in the servicing policy development process. The opportunity to assess proposed guidance allows for stakeholders to provide insights into the practical application of proposed policy changes before new guidance becomes effective. MBA will communicate developments to the Loan Administration Committee.

FHA Implements Cybersecurity Incident Reporting Requirements

FHA announced that effective immediately, mortgagees are required to report significant cybersecurity incidents within 12 hours. Mortgagees must notify the FHA’s Resource Center via email, which must include the incident's date and time, a summary of the incident, its impact on personally identifiable information, and a designated point of contact for the mortgagee. While cybersecurity incident reporting is required by many government entities and the GSEs, the FHA’s reporting timeframe is significantly shorter than those recently implemented by Ginnie Mae (48 hours). In recent months, the mortgage industry has been the target of many attempted and successful cybersecurity incidents. MBA will continue to urge the federally-related housing and guarantor agencies to harmonize notice requirements. MBA will continue to engage and review policies implemented by the GSEs, FHA, VA, and RHS through the Residential Loan Production Committee and Government Loan Production Subcommittee.

FHA Increases Loan Assumption Fee Cap

FHA announced at #MBASecondary24 that it would increase the allowable fee mortgagees can charge to process and underwrite FHA assumptions. On Thursday, FHA released its latest update to its Single-Family Housing Policy Handbook (Handbook). The updated Handbook includes a number of recommendations proposed by MBA, including an increase to the assumption processing fee from $900 to $1,800. MBA has advocated for both FHA and VA to increase the allowable fee for the assumption of VA and FHA-backed mortgages. FHA's update follows the VA's February Circular implementing an Assumption Locality Variance to increase its fee. MBA has urged VA to go beyond the locality variance and raise the base processing fee. While rates remain at recent highs, assumptions have become more popular and it is important that the allowable fee reflects the actual cost of originating an assumable mortgage. MBA will continue to engage with HUD, VA, and USDA on behalf of members and gain feedback on loan production issues through the Residential Loan Production Committee and Government Loan Production Subcommittee.

House Energy & Commerce Subcommittee Advances Wide Ranging Federal Data Privacy Bill

The House Energy and Commerce Committee’s Subcommittee on Innovation, Data, and Commerce approved sweeping data privacy legislation by voice vote (without amendments). The American Privacy Rights Act of 2024 (APRA) is championed by full Energy & Commerce Chair Cathy McMorris-Rodgers (R-WA) and the panel’s Ranking Member Frank Pallone (D-NJ). MBA joined a financial services trade association coalition letter criticizing the proposals’ failure to adequately recognize the strong privacy and data security standards already in place for the financial sector under the Gramm-Leach Bliley Act (GLBA). MBA has additional concerns with APRA, as drafted, regarding the bill’s private right of action provision, its insufficient pre-emption of state laws, and its consumer “opt-out” of an evaluation by algorithm for “consequential decisions,” such as housing and credit opportunities. See MBA’s letter to subcommittee members here. MBA will continue to work with our coalition partners to advocate for changes to the APRA text before its mark-up by the full Energy and Commerce Committee – and possible House floor consideration.

House Subcommittee Holds Hearing on Energy Codes, Green Building Policies

The House Energy and Commerce Committee’s Energy, Climate, and Grid Security Subcommittee held a hearing titled, “Green Building Policies: Jeopardizing the American Dream of Homeownership.” The hearing examined the impact of green building policies on housing affordability, including discussions regarding building energy codes, performance standards, and fossil fuel-use restrictions. Witnesses included executives from home building, building products, and energy firms, as well as a building science expert. A full summary of the hearing can be found here. Republicans specifically criticized the recently finalized standards for HUD- and USDA-financed housing, in addition to plans to ban fossil fuels in federal buildings by 2030. Democrats generally supported the administration’s efforts and emphasized the need to balance affordability and energy efficiency concerns. In April, HUD published its final rule on energy-efficiency building standards to require any new construction with FHA-insured and USDA-guaranteed financing to use significantly newer building codes that most states have yet to adopt. The rule is effective for building permit applications starting in December 2025. MBA will continue to highlight our concerns with policies that impact housing costs in ongoing conversations with lawmakers and regulators alike.