MBA Advocacy Update

Steve O'Connor soconnor@mba.org; Bill Killmer bkillmer@mba.org  

December 24, 2018

On Friday, MBA President and CEO Robert D. Broeksmit, CMB, testified before the House Financial Services Committee on the need for GSE reform.  

Amid a partial government shutdown, Congress and the administration return this Thursday to negotiate terms of a Continuing Resolution to extend federal programs and funding for seven agencies--including HUD. Meanwhile, the Fed announced an expected increase in short-term interest rates, but signaled the pace of future rate increases could slow in response to economic volatility. And HUD Deputy Secretary Pam Patenaude announced that she will be leaving the agency in early 2019.  

Administration, Congress Continue Talks on Government Funding
[EDITOR'S NOTE: This item has been modified to reflect updates as of press time). The Trump Administration and Congress continue to negotiate legislation to resolve the latest government shutdown.

Because Congress has already approved a portion of the various appropriations bills, only certain agencies would be impacted by a shutdown, such as HUD (including FHA and Ginnie Mae), USDA (including RHS) and Treasury (including the IRS). The National Flood Insurance Program also expired early Saturday morning without resolution.  

MBA has created a guide for its members regarding the federal government shutdown: http://mba-pc.informz.net/mba-pc/data/images/Government_Shutdown_Implications.pdf.  

For more information, please contact Dan Fichtler at (202) 557-2780 dfichtler@mba.org; or Erin Barry at (202) 557-2913 ebarry@mba.org.  

MBA CEO Bob Broeksmit Testifies on Housing Finance Reform
On Friday, MBA President and CEO Robert D. Broeksmit, CMB, testified before the House Financial Services Committee at a hearing, A Legislative Proposal to Provide for a Sustainable Housing Finance System: The Bipartisan Housing Finance Reform Act of 2018. His comments focused on the ongoing need for comprehensive GSE reform legislation. A complete transcript of his testimony is available here: https://www.mba.org/2018-press-releases/december/broeksmit-testifies-on-housing-finance-reform.  

The full hearing can be accessed at https://www.c-span.org/video/?456171-2/house-financial-services-committee-holds-hearing-housing-finance-reform.

For more information, contact Dan Grattan (202) 557-2712 dgrattan@mba.org; or Kelley Williams at (202) 557-2741 kwilliams@mba.org.  

Federal Open Market Committee Raises Target Range for Federal Funds Rate
The Federal Open Market Committee met this week and announced an increase in the target range for the federal funds rate to 2-1/4 to 2 1/2 percent (https://www.federalreserve.gov/newsevents/pressreleases/monetary20181219a.htm).  

MBA Chief Economist Mike Fratantoni said in response:  

"Reacting to a noticeable slowdown in global growth, which has resulted in a substantial increase in financial market volatility, the Federal Reserve has changed its tune with respect to the future path of hikes for the federal funds rate.  As highlighted in recent public remarks, Chairman Powell and the FOMC believe that the fed funds rate is now quite close to the neutral level - the level which would keep the economy at full employment and stable inflation. As the market expected, the Fed did raise rates another quarter point following this meeting. The job market is quite strong, with the unemployment rate below the level that can likely be sustained with inflation picking up. However, with this additional rate hike, and with the ongoing crimping of liquidity caused by the shrinkage of the Fed's balance sheet, we expect they will pause here for a few meetings, and will likely only hike rates twice next year."  

For more information, please contact Mike Fratantoni at (202) 557-2935 mfratantoni@mba.org.  

Trump Picks Otting for Acting FHFA Chief
President Trump announced his intent designate Comptroller of the Currency Joseph Otting as acting director of the Federal Housing Finance Agency. Current FHFA Director Melvin Watt, who has headed the housing agency since 2014, notified the administration that he will depart at the end of his term on January 6. Otting will serve as acting director upon Watt's departure until a permanent director is confirmed. Otting will simultaneously carry out his duties as head of the OCC.  

For more information, please contact Julienne Joseph at (202) 557-2782 jjoseph@mba.org.  

Pam Patenaude to Leave HUD Next Year
Pam Patenaude, Deputy Secretary HUD, announced she will leave office early next year. Patenaude will transition out of her position in January, when Federal Housing Administration Commissioner Brian Montgomery will step in as acting Deputy Secretary, while retaining his role overseeing FHA.  

For more information, please contact Pete Mills at (202) 557-2878 pmills@mba.org.  

HUD Announces Widespread Increases in 2019 FHA Loan Limits
Following robust increases in median house prices over the past year, FHA loan limits will rise in most areas of the country in 2019. The floor for FHA loan limits on one-unit properties will rise from $294,515 to $314,827. Meanwhile, the ceiling for one-unit properties will rise from $679,650 to $726,525--equivalent to the GSE maximum conforming loan limit. The national loan limit for FHA-insured reverse mortgages, which does not vary geographically, will also rise from $679,650 to $726,525.  

FHA forward loan limits, including the floor and ceiling for these limits, are determined through formulas established by Congress and are not subject to the discretion of FHA or HUD.  

For more information, please contact Dan Fichtler at (202) 557-2780 dfichtler@mba.org; or Andrea Oh at (202) 557-2922 aoh@mba.org.  

VA Publishes Rule on Cash-Out Refinances
Last week, the Department of Veterans Affairs released an interim final rule (https://www.federalregister.gov/documents/2018/12/17/2018-27263/loan-guaranty-revisions-to-va-guaranteed-or-insured-cash-out-home-refinance-loans) to implement new protections against loan churning through cash-out refinances. This rule is required by law to ensure that cash-out refinances are "in the financial interest of the borrower," and it is meant to complement recent program changes governing streamlined refinances (https://www.benefits.va.gov/HOMELOANS/documents/circulars/26_18_13.pdf).  

Specific provisions include 210-day/6-month loan seasoning, LTV ratios that cannot exceed 100 percent, and funding fees that can only be rolled into the loan up to an LTV ratio of 100 percent. Cash-out refinances must also meet a net tangible benefit test, which can be satisfied through a number of options, including a lower rate, a shorter term, elimination of mortgage insurance, or a switch from an adjustable to a fixed rate, among others.  

As a result of temporary authority granted to VA, this rule has been issued as an interim final rule, which means the provisions will take effect on February 15, 2019 without consideration of public comments. VA has stated, however, that it will still seek public comments, and will take such comments into account when determining whether to revise the rule after it goes into effect.  

For more information, please contact Dan Fichtler at (202) 557-2780 dfichtler@mba.org.  

FHFA Releases 2019 GSE Scorecard
On December 19, the Federal Housing Finance Agency released the 2019 Scorecard for Fannie Mae, Freddie Mac and Common Securitization Solutions (https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/2019-Scorecard-12192018.pdf). The Scorecard highlights FHFA's conservatorship priorities for the GSEs as well as the coordinated effort to implement the Uniform Mortgage-Backed Security.  

With respect to taxpayer protection and an increased presence of private capital, the Scorecard highlights the continued GSE use of credit risk transfers. The Scorecard also directs the GSEs to evaluate the liquidity requirements for non-depository seller/servicer counterparties to determine whether changes in these requirements are warranted.  

With respect to credit availability, the Scorecard references preparations for the transition away from LIBOR, steps to modernize the appraisal process and opportunities to enable technology to document income, assets, and employment.  

The Scorecard also directs the GSEs to continue their efforts to implement the UMBS, as well as various mortgage data standardization initiatives.  

For more information, please contact Dan Fichtler at (202) 557-2780 dfichtler@mba.org.  

FSOC Reiterates Need for Housing Finance Reform
On Wednesday, the Financial Stability Oversight Council--a group consisting of the heads of major federal and state financial regulators--released its 2018 annual report (https://home.treasury.gov/system/files/261/FSOC2018AnnualReport.pdf). Mandated by the Dodd-Frank Act, the report provides FSOC's views regarding the health of the U.S. financial system, including potential emerging threats and vulnerabilities as well as recommendations to strengthen financial stability.  

As has been the case in prior years, FSOC called for both regulators and market participants to take steps to increase the role of private capital in mortgage markets. FSOC also endorsed continuing efforts to advance the Common Securitization Platform and the Uniform Mortgage-Backed Security, as well as the development of capital requirements for Fannie Mae and Freddie Mac--which would remain suspended during the conservatorships.  

Importantly, FSOC also "reaffirm[ed] its view that housing finance reform is urgently needed to address the conservatorships, codify existing reforms and implement a durable and vibrant housing finance system." MBA fully agrees, and has developed a detailed proposal for a reformed secondary mortgage market (https://www.mba.org/issues/gse-reform).  

For more information, please contact Dan Fichtler at (202) 557-2780 dfichtler@mba.org.  

MBA Continues to Advocate for Final Basel III Simplification Rules
On Monday, MBA and the Independent Community Bankers of America sent a joint trade associations letter to the banking agencies (FDIC, OCC and the Federal Reserve), requesting a meeting to discuss the pending 2017 proposal to simplify the Basel III Capital rules.  

The proposal would increase the cap on the amount of mortgage servicing assets (MSAs) that a bank can include in Tier 1 capital from 10% to 25% but retain the increased and punitive 250% risk weighting assigned to MSAs. MBA has advocated that the proposed 25% cap be further increased to 50% and the punitive 250% risk weighting be reduced to no more than 130%. The letter stressed the fact that final rules are even more necessary now that the Agencies have issued proposed rules implementing the new community bank leverage ratio framework that was included in the recently-enacted regulatory relief legislation. The associations urged the Agencies to refrain from looping in concepts from the yet-to-be final Basel III simplification rules to the new CBLR framework, as that would result in unnecessary complications in the rules for small community banks.   

MBA is putting together an MSA working group to develop comments to the Agencies on the CBLR framework proposal.  

For more information, or to join the working group, please contact Fran Mordi at (202) 557-2860 fmordi@mba.org.  

Ohio Enacts Remote Online Notarization Legislation; New Law Follows Contours of MBA-ALTA Model
On Friday, Ohio enacted legislation (https://www.legislature.ohio.gov/legislation/legislation-summary?id=GA132-SB-263) that allows the state to join Michigan, Minnesota, Tennessee, Indiana, Virginia, Montana, Texas, Nevada and Vermont in permitting remote online notarization. Ohio is the sixth state in 2018 to enact RON legislation thanks to the leadership of the Ohio MBA. The language of the Ohio law closely follows the contours of the MBA-ALTA model bill, which can be found on the MBA Remote Online Notarization Resource Center (https://www.mba.org/audience/state-legislative-and-regulatory-resource-center/remote-online-notarization).  

For more information please contact William Kooper at (202) 557-2737 wkooper@mba.org; or Kobie Pruitt at (202) 557-2870 kpruitt@mba.org.  

MBA Education Webinar Jan. 17 on 10 Things Your Company Must Do in 2019
Join MBA Education on January 17 for its popular annual kick-off webinar that every lending executive should attend.  

For most companies, 2018 was a challenge with volumes dropping and profits shrinking, and 2019 looks to start out the same way. Now, early in the year, is the right time to make take steps to improve your business for 2019, while it can make a real difference. This webinar will provide participants with a Top Ten list of strategic initiatives that all mortgage bankers should be implementing in 2019. These very specific and very actionable suggestions will help you and your team focus on what will increase revenues, control costs, and better manage risk, not only in 2019 but also every year thereafter.  

To register for the webinar, click https://www.mba.org/store/events/webinar/ten-things-your-mortgage-company-must-do-in-2019.  

For more information, please contact Laura Vanegas at (202) 557-2785 lvanegas@mba.org

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