MBA State Relations Committee Update Highlights

News and information from the latest issue of MBA State Relations Committee Update.

Partial Tax Agreement Details Released
We are currently waiting for the final text of the House and Senate conference committee on tax reform. The agreement will reconcile the differences between the House and Senate tax reform bills and sets the stage for final votes early next week in both the House and Senate. Conferees are said to have agreed to cap mortgage interest deductibility at $750,000, splitting the difference between the House bill (which would have reduced the limit to $500,000) and the Senate bill (which would have preserved the current law limit of $1 million). Negotiators are also rumored to have agreed to allow Americans to deduct up to $10,000 in property or income taxes and shift the corporate tax rate to 21%. The final Senate bill did not include a prior provision that would have required any item of income that an accrual taxpayer recognizes for accounting purposes, including mortgage servicing rights (MSRs), also be recognized for tax purposes (MBA has lobbied to preserve this key fix in any final conference report). Once the final text is released, MBA will analyze the legislation for the final status of all issues important to the real estate finance industry. Once the House and Senate vote on the report, it will then go to President Trump, who is expected sign it into law before Christmas. 

MBA signed a joint letter with several other trade associations urging tax bill conferees not to change the ownership qualification period for the exclusion from capital gains on the sale of a principal residence to five out of the last eight years. (Under current law, the qualification is two of the last five years.)  The letter asserts that such a change could disproportionately penalize growing families and discourage labor mobility, and the signers encouraged the conference committee to retain current law in this area. MBA will be monitoring the conference committees' deliberations over the coming weeks in this and other areas important to the industry.

House Financial Services Committee Holds Final Markup
Last week, the House Financial Services Committee held its final markup of the year. The Committee advanced 13 bills, including measures that would place renewed restrictions on the Administration's ability to sell stakes in Fannie Mae and Freddie Mac. Importantly, HR 2948, the SAFE Transitional Licensing Act, was also included in the markup. MBA sent a letter and released a statement regarding the three of bills we were monitoring. Below are the vote tallies for each:

  • HR 2948, the SAFE Transitional Licensing Act, was passed and reported out of the Committee 60-0;
  • HR 4545, the Financial Institutions Examination Fairness and Reform Act, passed 50-10; and
  • HR 4560, the GSE Jumpstart Reauthorization Act of 2017, passed 33-27*.

*Ranking Member Maxine Waters (D-CA) offered an amendment to HR 4560 which would strike section 3 of the bill. As a reminder, this section would suspend contributions to the Housing Trust Fund and the Capital Magnet Fund if the dividend payments are not made on schedule. The amendment was not agreed to (26-34). 

FSOC Reiterates Need for Housing Finance Reform Legislation
On December 14, the Financial Stability Oversight Council (FSOC)-a group comprised of the heads of the major federal and state financial regulators-released its 2017 annual report. The report, mandated by the Dodd-Frank Act, provides the 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, the FSOC called for both regulators and market participants to take steps to increase the role of private capital in mortgage markets. The FSOC also endorsed continuing efforts to advance the Common Securitization Platform and the Single Security Initiative. Importantly, the FSOC also "reaffirm[ed] its view that housing finance reform legislation is needed to create a more sustainable system." MBA fully agrees, and has developed a detailed proposal to create a more vibrant secondary mortgage market.

GSEs Revise Seller Data Requirements in the Uniform Closing Dataset
In response to MBA raising various operational and cost concerns, Fannie Mae and Freddie Mac announced this week that they will no longer require a PDF of the Seller Closing Disclosure as part of the mandatory Uniform Closing Disclosure (UCD) submissions by lenders. Additionally, the GSEs communicated their intent to reduce the number of additional seller data points that will be required to be transmitted in the UCD submission. More details on these data requirements will be provided in the second quarter of 2018, and mandatory implementation will not occur before January 2019. MBA remains concerned about the costs associated with lenders creating new processes to provide such data, and will continue to engage with the GSEs and FHFA to develop a responsible path forward.

Resolution on PACE Lending Withdrawn at Council of State Governments National Conference
This week, at the Council of State Governments (CSG) National Conference, a resolution was withdrawn from consideration that suggested recently enacted laws in California resolve all issues apropos to PACE loans and should be emulated by other states in 2018. Ahead the Conference, MBA was joined by the American Bankers Association and the Credit Union National Association in writing to the members of two key committees to oppose the resolution as written. The letter pointed out that PACE loans should be subject to federal consumer protection requirements and not dependent on a patchwork of limited or non-existent state and/or municipal laws that do not adequately protect homeowners. The letter urged CSG to replace the resolution with one that: supports bipartisan legislation (S. 2155) in Congress to provide all borrowers federal Truth-in-Lending (TILA) and other Consumer Financial Protection Bureau (CFPB) protections; and, supports PACE obligations being recorded in proper lien priority - i.e. subordinate to all other prior recorded mortgages. MBA also alerted national consumer groups who worked with their California counterparts to also submit a letter in opposition to the resolution.

Senate Banking Committee Advances Bipartisan Regulatory Relief Bill
The Senate Banking Committee voted to report S. 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act by a vote of 16-7. The legislation contains several of MBA's priorities including: SAFE Act Amendments to create a transitional authority to originate loans, consumer protections for Property Assessed Clean Lending (PACE) loans, relief from HMDA reporting requirements for some institutions, as well as important fixes to TRID. S. 2155 was introduced by Senate Banking Committee Chairman Mike Crapo (R-ID), along with nine Republicans, nine Democrats, and one Independent. MBA sent a letter of support in advance of the markup.

Christopher M. George, Chairman-Elect of the MBA and the founder, President and CEO of CMG Financial, testified before the U.S. House of Representatives Financial Services Committee Subcommittee on Financial Institutions and Consumer Credit at a hearing entitled, "Legislative Proposals for a More Efficient Federal Financial Regulatory Regime: Part II." He urged the committee to pass H.R. 2570, the Mortgage Fairness Act, and the [yet unnumbered] Comprehensive Regulatory Review Act. His full written testimony is available here and a video of his appearance is here

HUD Reverses 2016 Policy and Bans FHA from Insuring Loans with PACE Liens
In a victory for MBA advocacy, HUD reversed its policy on Property Assessed Clean Energy Loans (PACE) that was enacted in July 2016. The announcement was made on December 7 in Mortgagee Letter ML2017-18, which stated that FHA would no longer insure mortgages that also carry PACE liens. This guidance is effective for case numbers issued thirty days after the date of the ML. MBA strongly opposed the 2016 policy, and the Association made reversing it an advocacy priority with the new Administration. In addition to meetings with HUD's new leadership on this topic, these efforts included a detailed letter to HUD Secretary Carson during March. The announcement discusses not only the need to protect the health of FHA's Single Family Mutual Mortgage Insurance Fund (MMIF), but also the need to protect FHA borrowers who, when getting a PACE loan, are not currently protected by national ability-to-repay or other CFPB regulations. Lastly, HUD noted concerns about PACE obligations being placed on FHA-insured mortgages that are already outstanding, because post-endorsement placement of these assessments makes it challenging to understand the risks involved and may violate FHA's loans terms. MBA looks forward assisting the Department on this matter.

HUD Announces Widespread Increases in FHA Loan Limits in 2018
Following robust increases in median house prices over the past year, FHA loan limits will rise in most areas of the country in 2018. The floor for FHA loan limits on one-unit properties will rise from $275,665 to $294,515. Meanwhile, the ceiling for one-unit properties will rise from $636,150 to $679,650-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 $636,150 to $679,650. 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.