MBA Offers Recommendations to Agriculture Dept. on Technology Fee

Mike Sorohan msorohan@mba.org

September 12, 2018

In a letter to the Department of Agriculture, the Mortgage Bankers Association offered a series of recommendations on a proposed Guarantee Systems User Fee in the Rural Housing Service's Single-Family Section 502 Guaranteed Loan Program.

The letter comes in response to a USDA request for comment on its intent to implement a technology fee, to be collected from lenders using the RHS automated guaranteed loan systems. USDA said collection of the fee would enable USDA to fund future information technology enhancements to improve program delivery for consumers and lenders.

"MBA supports upgrading these RHS systems, as they are outdated and in need of critical enhancements," said MBA Senior Vice President of Public Policy and Industry Relations Stephen O'Connor. "MBA believes it is critically important to ensure reliable technology is available for borrowers and lenders who rely on USDA loan programs."

MBA offered several recommendations related to operational issues, disclosures and oversight:

--As lenders are focused on the compatibility of their loan origination system platforms with the RHS technology upgrades, MBA said any such upgrades are designed with a focus on ways in which these systems interface. "Integrating the RHS upgrades with standard origination systems will cut down on the amount of time it takes for lenders to receive feedback, while mitigating the chance of input errors by allowing the information to be entered only once," MBA said.

--Because lenders have expressed concern that there may not be sufficient timing between the announcement of the fee and the implementation date. MBA recommended that USDA begin collection of the fee no earlier than the date that is 180 days after the final implementation announcement.

--MBA recommended USDA require preliminary estimates and final closing disclosures of the fee to better ensure a level playing field across lenders. "By requiring these disclosures, accurate and transparent information will be available to borrowers who are comparing mortgage options," MBA said. "While some lenders may choose to pass the fee on directly to consumers, without such a disclosure requirement, others may absorb the cost and therefore not disclose the fee. Inconsistency in disclosure practices may cause consumers to presume that the fee is optional or question its validity. With clear disclosure requirements, lenders choosing to absorb the cost would disclose the fee as a line item debit and subsequently offset it with a lender credit."

--MBA called for transparency and accountability regarding use of the collected funds. "As such, USDA should be clear that it is limited in the scope of acceptable uses for the funds and that these funds will not be used for unspecified or unrelated activities," MBA said.

--MBA said USDA should develop a detailed implementation plan for its technology upgrades, in consultation with industry and other stakeholders, including specific project descriptions, timelines and cost estimates. It said USDA should publicly post a summary of the implementation plan on its website and issue notifications if significant changes are made.

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