MBA State Relations Committee Update State Highlights
Advocacy News and Information From the Latest Issue of the MBA State Relations Committee Update
The CFPB submitted comments on the proposed Illinois Community Reinvestment Act (ILCRA) regulations to the Illinois Legislature's Joint Committee on Administrative Rules (JCAR) ahead of JCAR's hearing on the proposal this week. The CFPB supported a provision of the regulations that MBA has opposed: holding lenders accountable for any bias of independent appraisers, including bias on a subjective "should have known" basis. CFPB argued that the appraisal provision is consistent with federal Equal Credit Opportunity Act (ECOA) and cited as the authority for this position its statement of interest filed in an alleged case of appraisal bias in Maryland. However, MBA filed an amicus brief in that case arguing against CFPB’s views by referencing the abundant and explicit guidance, law, and other regulatory policies designed to appropriately maintain independence. MBA and the Illinois MBA responded this week by noting these points in communications to members of JCAR. The CFPB has taken active interest in state Community Reinvestment Acts with its November 2023 survey of state laws. MBA and Illinois MBA have continued to provide feedback to JCAR and IDFPR against this section and other issues raised in the letter. The final rule of ILCRA will change the tone of future CRA regulations in New York or potentially current longstanding regulations out of Massachusetts. JCAR held its second notice hearing on the ILCRA rules and is expected to take action on the proposal within the next month.
Legislative leaders in Albany reached a conceptual agreement with New York Governor Kathy Hochul on several issues related to housing affordability. With negotiations continuing through the week, the budget bills related to housing issues, when in print, are expected to include:
- A replacement for the MBA-supported 421a tax incentive program as well as a six-year extension for existing projects that have been affected since the program expired in 2022.
- A version of “good cause” eviction less robust than in stand-alone legislation MBA has opposed.
Reports indicate that the new 485x program will provide up to a 40-year property tax exemption in exchange for a larger share of units being designated as affordable housing in each property and new higher minimum wage levels and other benefits for construction workers employed on certain projects. The new good cause tenant protections are reported to limit the scope of policy by:
- Requiring local communities to opt in to the program.
- Adding a number of new exemptions not in the original, such as exemptions for newly constructed residential buildings (built in the last 30 years), owner-occupied buildings with eight units or less, landlords with a portfolio of 10 units or less, and apartments priced at 200 percent of federal fair market rent.
- Increasing the caps on permissible rent increases
Among other provisions, the budget is also expected to include: $500 million in state funding to develop 15,000 units on state-owned sites such as former prisons; flexibility to increase rents if tied to apartment improvements; and a plan to eliminate certain caps on the density of residential properties in order for landlords to convert office buildings to residential apartments. MBA and the New York MBA supported the effort to restore the 421a program and other affordable housing measures and have opposed good cause eviction, as highlighted in letters to the Governor Hochul and legislative leaders earlier this year. With the State Legislature likely to continue its session through mid-June, both MBA and the NYMBA will continue to work together to advocate for industry priorities.
The Federal Housing Finance Agency (FHFA) and the Conference of State Bank Supervisors (CSBS) signed a Memorandum of Understanding (MOU) “designed to facilitate information sharing with respect to nonbank mortgage companies.” Because the MOU was not published, few specific details are available regarding how the organizations will structure their collaboration, including whether confidential supervisory information is part of the agreement. The joint press release established a clearer scope of authority for CSBS. Specifically, the release noted that state financial regulators are the primary regulators of IMBs and that while each supervisory agency maintains specific authorities related to the mortgage industry, only state financial regulators have complete prudential authority over nonbank mortgage companies. Interagency coordination can help to streamline and eliminate duplicate requirements among regulators, but it is important that any information sharing in this case be limited each organization’s specific operational needs and respectful of the confidentiality of the entities that provide information to regulators. MBA will review the MOU when available and provide members with additional details.
MBA's Mortgage Action Alliance (MAA) issued a Call to Action asking Illinois members to urge their state senators to oppose a bill (SB 3235) that would mandate the Illinois Commission on Equity and Inclusion (Commission) conduct a mortgage lending “Disparity Study.” The Study was originally included in the second notice of proposed regulations to implement the Illinois Community Reinvestment Act (ICRA) in late 2023 by the Department of Financial and Professional Regulation (DFPR). MBA objected to the Study at the time because DFPR did not offer it as part of a public comment process and because the regulatory proposal included no assurances it would be conducted independently. The Study was subsequently removed from the re-proposed ICRA regulations, but it has now been proposed through SB 3235 with the same problematic language and direction. The Commission has no known experience or expertise in financial services or real estate finance and it is inappropriate to task it with conducting a mortgage lending study. Further, the legislation fails to ensure the Study would be conducted by an organization with a non-advocacy mission. The bill offers no opportunity for industry feedback on the Study’s results nor does it instruct the Commission to explain any potential causes or context for disparity or legally compliant ways to address them. SB 3225 would require the Study’s findings be implemented into ICRA examination criteria, which ultimately could change these exams from an LMI-based assessment to one based on race. Additionally, because the Study will not address causes of any disparity, DFPR may improperly incorporate its results into CRA exams. Rather than providing a means to improve CRA exam results of member companies, the Study supports a punitive enforcement-based approach towards supervision of licensees. MBA will continue to support efforts to expand access to credit while opposing efforts that add compliance costs without resolving any of the underlying barriers to credit. If you are a resident of Illinois and have not taken action yet, please click here to do so now.