MBA Advocacy Update

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

July 15, 2019

Last week, the House passed MBA-supported legislation clarifying seasoning requirements for refinanced mortgage loans to veterans. The House Committee on Financial Services began its planned two-day markup of roughly 20 proposals pertaining to residential appraisals, credit reporting, and corporate board diversity disclosures. And Federal Reserve Chairman Jerome Powell hinted in congressional testimony that an interest rate cut may come later this month.  

House Passes VA 'Orphan' Loan Bill
On July 9, The House passed both H.R. 1988 and S. 1749, identical legislation entitled the Protecting Affordable Mortgages for Veterans Act of 2019. As a reminder, this is the MBA-supported legislation designed to repair a drafting error that caused certain VA-guaranteed refinances to be ineligible for pooling into Ginnie Mae securities. As a result of this error, thousands of valid VA-guaranteed loans became "orphaned" and remained stranded on lender balance sheets. MBA sent a letter of support ahead of the final floor vote (http://mba-pc.informz.net/mba-pc/data/images/MBA-7-9-19-Suspension%20Bills-LOS.pdf).  

This legislation, originally introduced by Reps. David Scott, D-Ga., Lee Zeldin, R-N.Y., Mike Levin, D-Calif., and Andy Barr, R-Ky., and Sens. Kyrsten Sinema, D-Ariz., and Thom Tillis, R-N.C., removes duplicative requirements that created the 2018 Ginnie Mae pooling glitch. Importantly, it does not weaken any consumer protections necessary for refinances to obtain a VA guaranty. Further, it provides go-forward relief by restoring the calculation of the 210-day seasoning period to its original form--that is, the seasoning period will begin on the first payment due date of the prior loan, rather than the date that the borrower made the first payment.  

Passage of this legislation is the result of more than a year of MBA advocacy, and as an identical bill (S. 1749) was passed by the full Senate via voice vote last month, it is expected to go to the president's desk for his signature in the coming days.  

For more information, please contact Ernie Jolly at (202) 557-2741 ejolly@mba.org; or Dan Grattan at (202) 557-2712 dgrattan@mba.org.  

House Financial Services Committee Begins Markup of Appraisal, Credit Reporting, Corporate Governance Proposals
On July 11, the House Financial Services Committee began its markup of nearly 20 proposals pertaining to residential appraisals, credit reporting and corporate board diversity disclosures.   In a letter (http://mba-pc.informz.net/mba-pc/data/images/MBA_Letter_July2019Markup%20final.pdf) to members of the Committee, MBA urged support for H.R. 2852 (https://www.govtrack.us/congress/bills/116/hr2852), introduced by Reps. Brad Sherman, D-Calif., and Sean Duffy, R-Wis. The legislation would allow licensed appraisers to become eligible to conduct real estate evaluations on properties subject to mortgages insured by the Federal Housing Administration. The bill passed unanimously out of committee.  

MBA also expressed concerns with two credit-reporting-related bills that would negatively impact the real estate finance industry. The Clarity in Credit Score Formation Act of 2019 (https://financialservices.house.gov/uploadedfiles/bills-116pih-clarityscore.pdf), introduced by Rep. Stephen Lynch, D-Mass., for example, would authorize the Consumer Financial Protection Bureau to conduct biennial reviews of "credit scoring models" (undefined) and allow the Bureau to prohibit the use or alter the weighting of any model inputs that the Bureau deems "inappropriate." The measure would give the CFPB extraordinary authority over all manner of credit scoring and underwriting models used in consumer financial services.  

Additionally, the Improving Credit Reporting for All Consumers Act, (https://financialservices.house.gov/uploadedfiles/bills-116pih-impcredit.pdf), introduced by Rep. Alma Adams, D-N.C.,, includes a provision that has the potential to increase uncertainty for lenders and consumers alike by providing injunctive relief under the Fair Credit Reporting Act. This bill passed on party lines.  

MBA will continue to engage members of Congress on these proposals as they potentially proceed through the House.  

For more information, please contact Ernie Jolly at (202) 557-2741 ejolly@mba.org; or Dan Grattan at (202) 557-2712 dgrattan@mb.org.  

Federal Reserve Chairman Signals Possible Interest Rate Cut
Federal Reserve Chairman Jerome Powell appeared before the House Financial Services Committee on Wednesday, July 10, and the Senate Banking Committee on Thursday, July 11, to deliver his Semiannual Monetary Policy Report to Congress.  

Powell started each hearing by reading the same prepared remarks outlining a variety of concerns about the global economy that weigh on the U.S. outlook. He reiterated the Fed's intention to "act as appropriate to sustain the expansion." Observers interpreted that line, which first appeared in the Fed's June 19 policy statement, to mean the central bank's rate-setting Federal Open Market Committee is likely to lower its benchmark interest rate at its next policy meeting July 30-31. Powell would not answer with specificity any questions about what might sway Fed officials to considering a half-percentage-point rate cut instead of a quarter-point cut.  

House Financial Services questions covered numerous topics on the country's economic outlook but also focused on politically charged items, including Powell's job security and the feasibility of increasing the minimum wage. During Chairman Powell's appearance before the Senate Banking Committee, Chairman Mike Crapo, R-Idaho, touched on GSEs briefly in his opening statement. He mentioned that Powell has already called Fannie Mae and Freddie Mac "systemically important," and Crapo wanted Powell's view of a proposal for FSOC to designate the entities as systemically important financial institutions, which would bring them under Fed supervision. However, Crapo did not pursue this line of questioning during the Q&A portion and instead focused solely on cryptocurrency.  

For more information, please contact Tallman Johnson at (202) 557-2866 tjohnson@mba.org; or Erin Barry at (202) 557-2913 ebarry@mba.org.  

MBA Submits Joint Comment with ABA on FHA Single-Family Loan Sales
On July 5, MBA joined the American Bankers Association in submitting comments to FHA on its Advance Notice of Proposed Rulemaking on the Single-Family Loan Sale Program. MBA and ABA applauded FHA for its intention to transition the SFLS from a demonstration program to a permanent one, as the program has helped stabilize communities and provided tens of thousands of borrowers a second chance to save their homes, all while producing a better financial outcome for taxpayers. SFLS reduces losses to FHA's Mutual Mortgage Insurance Fund, relieving FHA of the high costs of maintaining and marketing foreclosed properties.  

MBA and ABA's suggestions for FHA to improve the SFLS Program include, but are not limited to, 1) establishing a regular schedule of loan sales, 2) maintaining consistent eligibility criteria across sales and lock-qualified loans as of a specific date, 3) expanding loan eligibility criteria, 4) revising reps and warrants, and 5) revising SFLS claims policies.  

Click to read MBA and ABA's full comment: https://www.regulations.gov/document?D=HUD-2019-0039-0018.  

For more information, contact Sara Singhas at (202) 557-2826 ssinghas@mba.org.  

FHA Publishes Updates to Single-Family Housing Policy Handbook
On Wednesday, FHA published updates to its Single Family Housing Policy Handbook 4000.1 (https://www.hud.gov/sites/dfiles/SFH/documents/sfh_hb_4000_1_redline.pdf). These updates include policy guidance and clarity on topics such as Minimum Decision Credit Score Determination, Net Tangible Benefit, Streamline and Rate/Term Refinances, as well as guidance regarding the incident end date policy for inspections in Presidentially Declared Major Disaster Areas.  

While this list is not comprehensive, it's strongly recommended that MBA members carefully review the redlined version of the updated handbook to ensure compliance with FHA's updated policies.  

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

New Report Details Product Design for SOFR-Indexed ARMs
On Thursday, the Alternative Reference Rates Committee released a white paper (https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2019/ARRC-SOFR-indexed-ARM-Whitepaper.pdf) illustrating the potential product design of a single-family, adjustable-rate mortgage indexed to the Secured Overnight Financing Rate. This white paper is a significant milestone in the broader push to move financial markets away from the use of LIBOR as the primary interest rate benchmark. Topics addressed in the white paper include index averaging, payment determination, adjustment periods, interest rate caps and margins.  

MBA continues to be heavily involved in the work of the ARRC with respect to both single-family and commercial/multifamily mortgages. As a reminder, MBA recently published a consumer disclosure template for lenders seeking to provide borrowers with information on the LIBOR transition as they consider new single-family ARM products.

For more information, or to join MBA's working group on single-family LIBOR transition issues, please contact Dan Fichtler at (202) 557-2780 or dfichtler@mba.org. To join MBA's working group on commercial/multifamily LIBOR transition issues, please contact Andrew Foster at (202) 557-2740 afoster@mba.org.  

Financial Regulatory Agencies Adopt Final Rule to Exclude Community Banks from Volcker Rule
On July 9, the Office of the Comptroller of the Currency, Federal Reserve, Federal Deposit Insurance Corp., Securities and Exchange Commission and the Commodity Futures Trading Commission adopted final rules to exclude community banks from the Volcker Rule, pursuant to statutory amendments made by certain sections of the Economic Growth, Regulatory Relief and Consumer Protection Act (https://www.fdic.gov/news/board/2019/2019-06-18-notational-fr-a.pdf?source=govdelivery&utm_medium=email&utm_source=govdelivery).  

In general, the Volcker Rule imposes prohibitions and restrictions on banking entities relating to proprietary trading and owning, sponsoring or having certain relationships with hedge funds or private equity funds. The final rules, which essentially adopt the proposal issued in May 2018, apply to community banks with $10 billion or less in total consolidated assets, and total trading assets and liabilities of 5 percent or less of total consolidated assets. The rules also, under certain circumstances, amend the restrictions that apply to a hedge fund or private equity fund sharing the same name or a variation of the same name with an investment adviser--as long as the adviser is not an insured depository institution, a company that controls an insured depository institution or a bank holding company. The final rules are effective on the date of publication in the Federal Register.  

For more information, please contact Fran Mordi at (202) 557-2860 fmordi@mba.org.  

D.C. Passes Legislation to License, Regulate Appraisal Management Companies
On July 9, the Council of the District of Columbia unanimously passed emergency legislation to establish required Dodd-Frank minimum standards for appraisal management companies. Once signed by Mayor Muriel Bowser, the Department of Insurance, Securities and Banking will be required to promulgate rules that govern the licensing of AMCs.  

The District has taken a major step toward meeting the Aug. 10 deadline that would have restricted the ability of lenders to use AMCs in the loan process if the jurisdiction had failed to comply with federal requirements. Passage of AMC legislation in D.C., which was the focus of a Mortgage Action Alliance Call to Action, leaves Massachusetts as the only state that has yet to adopt the required Dodd-Frank rules. However, Massachusetts recently moved legislation (H.3904, formerly H.1114) through the House and had companion legislation (S.2288) pass in the Senate on Thursday to license AMCs. The bills must now be reconciled before final passage. MBA recently expressed support for H.3904, and the Massachusetts MBA encouraged its passage during the organization's Beacon Hill Day advocacy agenda (http://mba-pc.informz.net/mba-pc/data/images/AMC%20Support%20Letter%20H-1114%20revised.pdf).  

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 Mortgage Servicing and Subservicing Webinar Series July 17, 24
Join MBA Education and industry experts on July 17 and 24 for a two-part series on mortgage servicing and subservicing. Completion of this series will provide you with information necessary to understand servicing and its related components.  

Anyone who seeks to increase their knowledge of mortgage servicing will benefit from these conversations that will cover critical topics such as how to manage and pick a subservicer, which loans should be retained, why or why not to retain servicing in today's market, and profitability trends for servicers.  

To register for Part One, click https://www.mba.org/store/events/webinar/mortgage-servicing-and-sub-servicing-part-i-overview.  

To register for Part Two, click https://www.mba.org/store/events/webinar/mortgage-servicing-and-sub-servicing-part-ii-details.  

For discounts when registering for both programs, contact education@mba.org.  

For more information, please contact Allison Yaworske at ayaworske@mba.org; or (202) 557-2912.

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