MBA State Relations Committee Update Federal Highlights
Advocacy News and Information from the Latest Issue of the MBA State Relations Committee Update
FHFA Announces Updates on Loan Repurchases, Appraisals, and Pricing at MBA Annual Convention : The Federal Housing Finance Agency (FHFA) announced several updates on key issues that have been part of MBA's ongoing advocacy. FHFA noted that these policy updates are a result of engagement with industry stakeholders and are intended to enhance efficiencies for Fannie Mae and Freddie Mac (the GSEs) and promote cost savings in the single-family mortgage market. Loan Repurchases - Freddie Mac's current targeted pilot that offers a fee-based alternative to repurchases for performing loans with defects will expand to all approved lenders. Under this expansion, lenders will be able to opt in to the fee-based repurchase alternative annually. Lenders with nonacceptable quality (NAQ) rates below 2% will pay no fee at all. Additionally, lenders that do not participate in the pilot will be offered a “Fee Only” option, for which the fee is charged on the defective loan only, instead of a repurchase. This will better align the repurchase alternative offerings across the GSEs. Appraisals - In support of FHFA’s ongoing appraisal modernization efforts, the GSEs will expand eligibility for appraisal waivers and inspection-based appraisal waivers. The maximum loan-to-value (LTV) ratio for purchase loans eligible for appraisal waivers will increase from 80 percent to 90 percent, and the maximum LTV ratio for purchase loans eligible for inspection-based appraisal waivers will increase from 80 percent to 97 percent, consistent with standard Guide eligibility requirements. FHFA will also significantly expand the Uniform Appraisal Dataset to include appraisal data from applications for FHA loans. GSE Pricing - The GSEs will provide a 60-day advance notice of increases to their base guarantee fees greater than 1 basis point for loans delivered through the mortgage-backed security (MBS) swap channel. This will ensure greater pipeline protection for lenders while still allowing the GSEs to have flexibility to appropriately manage their business operations. In a press statement, MBA President and CEO Bob Broeksmit, CMB, thanked FHFA for addressing our members on these important issues. MBA has been a leading industry voice in seeking effective alternatives to loan repurchase requests and appreciates the ongoing, constructive engagement with FHFA, Fannie Mae, and Freddie Mac over the past few years. Expanding Freddie Mac’s pilot program is another important step toward encouraging high-quality underwriting and eliminating performing loan repurchases. MBA also support the expansion of appraisal waivers, which will lower costs for moderate-income first-time buyers. A 60-day advance notice for some guarantee-fee increases is a response to our concerns and is a welcome development that will allow lenders to better manage their pricing strategies and loan pipelines. MBA have long called for increased pricing transparency and believe more conversations are needed to better balance who bears the risks of pricing volatility between the primary market and the GSEs. MBA will continue to work with FHFA and the GSEs on these important policy issues and looks forward to learning of any new developments on property insurance costs and availability, which was also addressed at FHFA’s session.
FHA Announces ‘Show Me’ Solution: The Federal Housing Administration (FHA) proposed a long-awaited Mortgagee Letter (ML) to the Single-Family Drafting Table for public comment (Nonjudicial Foreclosure Process for Mortgagees with Secretary-held Liens) in response to the 8th Circuit’s 2023 opinion in Show Me State Premium Homes v McDonnell. The Show Me State decision held that a subordinate lien, such as an FHA partial claim, held by the United States must be extinguished by a judicial foreclosure sale. FHA’s proposed ML allows servicers to resume the nonjudicial foreclosure process. FHA’s proposed ML follows their interim guidance recently published in ML 2024-17, which allowed servicers to request that the Department of Housing and Urban Development (HUD) release the Secretary-held lien in the event the non-judicial foreclosure sale resulted in no surplus funds. This announcement follow’s MBA’s advocacy requesting that FHA address Show Me shortly after the 8th Circuit’s July 2023 decision, given the high volume of partial claims servicers and borrowers completed during the COVID-19 pandemic. Similar to interim guidance, the ML allows servicers to request that HUD release its secretary-held lien following a nonjudicial foreclosure sale. To do so, servicers must provide HUD notice of its intent to proceed with the nonjudicial foreclosure sale through EVARS (which includes a certification component) and collect surplus funds on HUD’s behalf where required. Servicers have five business days to remit surplus funds to HUD after receiving the proceeds. Servicers must also submit an EVARS request to proceed through the judicial foreclosure process where the preferred method of foreclosure is the nonjudicial process. Documenting the EVARS request will allow servicers to exclude the additional time to complete the judicial process from the Reasonable Diligence Timeframe. Servicers are also permitted to request reimbursement for attorneys’ fees that exceed the maximum allowable fee provided a cost breakdown is submitted. Comments are due November 25, 2024. MBA will meet with members of the Loan Administration Committee to draft its response.
FHA Proposal to Reduce DE Underwriter Requirements: The FHA released a draft Mortgagee Letter (ML) last week for public comment via the FHA Single-Family Drafting Table that would allow Direct Endorsement (DE) underwriters to work part-time for FHA-approved mortgagees. Although DE underwriters are still required to be employed by a single mortgagee and may not contract out underwriting functions, experience requirements have been adjusted to support part-time roles. These changes apply to all FHA Title II forward and Home Equity Conversion Mortgage (HECM) programs and will be incorporated into an upcoming update of HUD Handbook 4000.1. This update, aims to reduce barriers for smaller lending institutions and Community Development Financial Institutions (CDFIs) in a time where loan volume has decreased. MBA will gather feedback to respond to the draft ML through the Government Loan Production Subcommittee.
GSEs Announce Detailed Timeline for UAD 3.6 and URAR Implementation: Fannie Mae and Freddie Mac released a detailed timeline for implementing the Uniform Appraisal Dataset (UAD) 3.6 and the new Uniform Residential Appraisal Report (URAR), providing specific dates to help the industry prepare. Training for lenders and software providers begins on November 18, 2024, with continuing education for appraisers available in 2025. Key dates include the July 28, 2025, mandate for Uniform Loan Delivery Dataset (ULDD) compliance, a limited "test and learn" phase from September 8, 2025, to January 25, 2026, and full production beginning January 26, 2026. This preparation enables lenders to align their systems and workflows with the latest requirements, minimizing disruptions and maintaining compliance in the appraisal process. All lenders must adopt UAD 3.6 by November 2, 2026, with final UAD 2.6 revisions accepted until May 3, 2027.
MBA Residential Board of Governors Approves 2024-2025 Policy Priorities: MBA’s Residential Board of Governors (“RESBOG”) voted unanimously to adopt its residential policy priorities for the new membership year. The priorities cover three broad policy areas: 1) expansion of residential housing supply and affordability – a repeat priority from the prior year; 2) reduction of barriers to home refinancing, particularly for recent homebuyers; and 3) reforming credit underwriting guidelines to better reflect the next generation of first-time homebuyers. MBA’s RESBOG Chair for the 2024-2025 year is David Battany, Executive Vice President of Capital Markets at Guild Mortgage. Each year, the RESBOG policy priorities establish areas of emphasis with specific objectives in addition to the ongoing efforts of MBA’s policy staff and Residential Policy committees. MBA’s policy staff and Residential Policy committees will establish workflows to tackle each priority issue and will provide regular progress updates to RESBOG throughout the year.
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. “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.” 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; and, 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. 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.
CFPB Releases Final Rule Implementing Section 1033: 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. 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. 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.
MBA Submits Comments on FDTA Proposed Rule: 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. 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. 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. MBA will continue to monitor this rulemaking process and communicate any updates to members.
MBA Urges FHFA to Update Its Master Condo Insurance Policy Deductible Guidelines: MBA 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. 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. 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.