MBA State Relations Committee Update Federal Highlights

Advocacy Newsand Information from the Latest Issue of the MBA State Relations Committee Update

MBA Releases The Roadmap to CFPB 2.0
MBA released a new paper, The Roadmap to CFPB 2.0, which details recommendations to ensure stability and consistent consumer protections in the Consumer Financial Protection Bureau's practices and consumer financial laws. The paper draws from the detailed responses MBA submitted to the series of 12 requests for information (RFIs) the Bureau released in 2018 seeking suggestions for how it could better align its supervisory practices and the regulations it administers with its statutory mandate and generally accepted principles of sound prudential regulation. MBA CEO Bob Broeksmit, CMB, issued a statement and published a blog post announcing the Roadmap. The Roadmap is a follow-up to MBA's 2017 paper, CFPB 2.0: Advancing Consumer Protection.

MBA's National Advocacy Conference
This year's National Advocacy Conference (NAC) will take place April 2 and 3 at the Capital Hilton Hotel in Washington, D.C. The NAC is an annual tradition that enables MBA members to speak directly to their elected officials as advocates for our industry. Speakers at the conference's general session will include HUD Secretary Dr. Ben Carson, key Senate Banking Committee member Doug Jones (D-AL), senior House Financial Services Committee member Gregory Meeks (D-NY), House "Problem Solvers" Caucus Co-Chairs Josh Gottheimer (D-NJ) and Tom Reed (R-NY), Ways and Means Vice Chair Terri Sewell (D-AL), and Fox News anchor Chris Wallace - in addition to a memorable reception with elected officials in the Great Hall at the Library of Congress. Our CREF members will hear directly on April 3 from speakers that include Senate Banking Committee and Senate Finance Committee member Tim Scott (R-SC), House Appropriations Committee member Tom Graves (R-GA), and House Ways and Means Committee member John Larson (D-CT), along with key staff from the office of House Speaker Nancy Pelosi (D-CA), the Senate Appropriations Committee, and the Senate Health, Education, Labor, and Pensions (HELP) Committee. Register today to be a part of our industry's largest advocacy event of the year!

MBA Provides Input to FHFA on GSE Credit Score Requirements
MBA submitted comments to FHFA on its proposed rule to create a process for validating and approving credit score models used by Fannie Mae and Freddie Mac. Broadly, the proposed rule develops a process by which the GSEs would be required to solicit applications for new credit score models and review these models across a number of dimensions. In its comments, MBA provided recommendations to further facilitate competition in the market, as well as to enhance transparency in the validation and approval process. These recommendations address uses of credit scores, approval timelines, standards for accuracy, treatment of applicants, scope of GSE responsibilities, ownership of credit score model providers, and pilot programs, among other issues.

Supreme Court Issues Decision in Obduskey v. McCarthy & Holthus
The U.S. Supreme Court issued its decision in Obduskey v. McCarthy & Holthus. In a unanimous ruling, the Court held that a law firm hired to carry out a non-judicial foreclosure proceeding under Colorado law is not a "debt collector" for purposes of the Fair Debt Collection Practices Act (FDCPA). Therefore, according to the Court, "the debt-collector-related prohibitions of the FDCPA (with the exception of § 1692f(6)) do not apply to those who, like [the law firm], are engaged in no more than security-interest enforcement." In contrast with non-judicial actions, the Court's does not address whether the FDCPA's requirements apply to businesses that judicially enforce a security interest. The Court's decision is consistent with the arguments made in MBA's Obduskey amicus brief, which explained how applying the FDCPA to non-judicial foreclosures increases borrowing costs without meaningfully furthering consumer protection. 

FHA Issues Announcement on Managing Mortgage Risk Trends in Single Family Portfolio
FHA issued an info document (FHA INFO #19-07) addressing mortgage risk trends in the FHA Single Family Portfolio. In the announcement, FHA informed lenders that the TOTAL Scorecard, the algorithm developed by HUD to evaluate borrower credit history and application information, will be updated to require manual underwrites on loans with lower credit scores and higher debt-to-income ratios. The new TOTAL Scorecard update will apply to all FHA case numbers assigned on and after March 18, 2019. While the announcement stops short of identifying the specific parameters that will trigger the manual underwrite, it does reference guidance found in FHA Mortgagee Letter 2013-05 published in 2013. The mortgagee letter established Review Rule 14, which mandated manual underwrites on all loans with middle credit scores below 620 and debt-to-income ratios greater than 43 percent. The rule was eventually removed from the TOTAL scorecard in August 2016. MBA will continue to work with its partners at FHA to gain further clarity regarding the announcement.

Trump Administration Releases 2020 Budget Proposal
The Trump Administration released its budget proposal for Fiscal Year 2020.  The Trump blueprint includes the following key elements: GSEs

  • Recommends an increase of the 10-basis point tax on g-fees to 20 basis points and would extend the tax to 2023 (currently set to expire in 2021);
  • Recommends suspending contributions to the Housing Trust Fund and the Capital Magnet Fund;
  • With respect to GSE reform efforts, "The Administration has publicly expressed its desire to work with members of Congress to facilitate a more sustainable housing finance system."

HUD/FHA/Ginnie Mae

  • Requests $44.1 billion in funding for HUD, an $8.7 billion or 16.4 percent decrease from the 2019 request;
  • Proposes a lender fee to raise $20 million to fund FHA IT infrastructure improvements;
  • Requests $550 billion in new guarantee authority for Ginnie Mae;
  • Eliminates funding for CDBG and HOME Investment Partnership Programs.

VA

  • Requests $93.1 billion in funding for VA, a $6.5 billion or 7.5 percent increase from the 2019 enacted level;
  • Provides $4.3 billion for technology improvements, an increase of more than $200 million.

USDA/RHS

  • Requests $20.8 billion in funding for USDA, a $3.6 billion or 15 percent decrease from the 2019 estimate

The annual budget proposal is a framework that does not have the force of law, and represents the first step in the much lengthier federal budget/appropriations process. Throughout the process of discussing key elements of the budget plan, MBA will work to ensure continued support for vibrant real estate markets that benefit all market participants.

Senate Banking Committee Receives Consumer Financial Protection Bureau Semi-Annual Report
The Senate Committee on Banking, Housing, and Urban Affairs held a hearing entitled "The Consumer Financial Protection Bureau's Semi-Annual Report to Congress." The Honorable Kathy Kraninger, Director of the CFPB, was the sole witness. A summary of the hearing can be found here. Chairman Mike Crapo (R-ID) noted the positive steps the CFPB took recently regarding HMDA reporting requirements, and said he hoped the CFPB would identify opportunities to update the Fair Credit Reporting Act so that it works in a digital world. Senator Mark Warner (D-VA) expressed concern-and Director Kraninger agreed-that the termination of the QM Patch would be detrimental to affordable housing and said he was optimistic that the Senate would find a legislative solution. Ranking Member Sherrod Brown (D-OH) and other Committee Democrats were sharply critical of Director Kraninger and the CFPB's efforts to eliminate the ability to repay requirement in its payday loan rule, its decision to discontinue Military Lending Act compliance examinations, and the decline in CFPB enforcement activity with regard to fair lending and student loan servicing.

Senate Banking Committee Holds Hearing on FSOC Designations
The Senate Committee on Banking, Housing, and Urban Affairs held a hearing entitled, "Financial Stability Oversight Council Nonbank Designations." Witnesses were Dr. Douglas Holtz-Eakin, American Action Forum, Mr. Paul Schott Stevens, Investment Company Institute, and Professor Jeremy Kress, University of Michigan Ross School of Business. During the question and answer portion of the hearing, Senator Mike Rounds (R-SD) highlighted S. 603, the FSOC Improvement Act that would require FSOC to consider non-designation alternatives but would not take away from FSOC's emergency designation process.  Chairman Mike Crapo (R-ID) noted S. 603 in his statement and emphasized that FSOC's designation process must be clear, robust and focused on addressing real underlying risks.

House Panel Discusses National Flood Insurance Program
The House Financial Services Committee held a two-panel hearing entitled "Preparing for the Storm: Reauthorization of the National Flood Insurance Program." The first panel featured six members of Congress while the second featured a broad array of industry participants. Before the hearing, Chairwoman Maxine Waters (D-CA) introduced a package of legislation to reform and reauthorize the long-debated insurance backstop. The package would extend the program until 2024, provide discounted premium rates for people with lower incomes, expand flood mapping, and cancel the program's debt of more than $20 billion. While Republicans agree with the majority that the program requires significant overhaul ahead of its May 31 expiration, forgiving the program's mounting debt was noted by GOP members as a non-starter. While both Chairwoman Waters and Republicans said they hoped to work together to tackle the issues and reauthorize the program, odds are long that legislation could be agreed upon given the time frame. Current expectations are for bipartisan discussions to continue while another short-term extension of the program is enacted close to the deadline. A copy of the official hearing memorandum can be found here and a summary of the hearing can be found here.

FHA Expands Manual Underwriting to Address "Risk Layering"
FHA released a memo describing new steps to address increasing risks in its single-family portfolio. Effective for loans with case numbers assigned on or after March 18, 2019, updates to the TOTAL Mortgage Scorecard will require manual underwriting for certain loans with higher-risk characteristics. While the memo references an earlier FHA policy requiring manual underwriting for loans with credit scores below 620 and DTI ratios above 43 percent, the new guidance does not include specific thresholds. MBA will engage with FHA and provide further information as it becomes available.