MBA State Relations Committee Update Federal Highlights
Advocacy News and Information from the Latest Issue of the MBA State Relations Committee Update
In response to MBA’s ongoing advocacy on this issue, Fannie Mae and Freddie Mac (GSEs) each released notices that confirmed that their policies will continue to exclude seller or listing agent payments of buyer agents’ commission from interested party contributions (IPCs). If a seller or seller’s real estate agent continues to pay the buyer’s real estate agent commission in accordance with local common and customary practices, the amounts are not required to be counted towards the IPC limits. The GSEs also noted that they will continue to evaluate their requirements on real estate agent commissions to determine any necessary changes that may be needed in the future. For months, MBA has been engaged with GSEs, Federal Housing Finance Agency (FHFA), Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA) to identify possible guideline clarifications or changes that may be needed because of new real estate agent compensation arrangements that might arise from the National Association of Realtors®(NAR) commissions litigation. Following the details of the settlement announced in March, MBA sent a joint letter with NAR to leadership at FHA, FHFA, and the GSEs that asked for confirmation that their policies will continue to exclude seller or listing agent payment of buyer agents’ commission from IPCs. In addition to the GSEs' announcement, the FHA last month also confirmed, in response to the MBA/NAR letter, that “under existing FHA policy, if sellers continue to pay buyer-side real estate agent commissions and fees as a matter of state or local law or local custom, and if the commissions and fees are reasonable in amount, existing policy would not treat those payments as interested party contributions provided all other requirements are met.” The FHA and GSE announcements did not increase IPC limits or change policy; rather, they confirmed that seller agreements to pay reasonable and customary buyer agent commissions will not count toward the limits. MBA will continue its advocacy on this issue with the VA and Rural Housing Service. In addition, MBA urged the VA in an April 3 letter to expedite regulatory changes to its rule prohibiting Veterans and active-duty service members from paying any portion of brokerage commission when purchasing a home with a VA mortgage. Failure to revise the rule would put VA buyers at a significant disadvantage – especially in today’s tight inventory market. MBA is also assessing other changes that may be needed in agency guides and Consumer Financial Protection Bureau (CFPB) rules to ensure any new agent compensation arrangements do not limit access or raise the cost of mortgages.
FHFA announced a proposed new product from Freddie Mac that would permit the GSE to begin purchasing certain single-family, closed-end second mortgages. Freddie Mac proposes to purchase closed-end second mortgages on properties for which it holds the first mortgage. In a closed-end second mortgage loan, the borrower’s funds are fully disbursed when the loan closes, the borrower repays over a set time schedule with a fixed rate, and the mortgage is recorded in a junior lien position in the land records. This proposal is intended to provide borrowers a lower cost alternative to a cash-out refinance in higher interest rate environments. Freddie Mac states that the purchase parameters would aim to minimize their credit risk while balancing potential cost saving to existing homeowners. The product would allow up to a 20-year term and a maximum total loan-to-value (TLTV) of 80%, not to exceed the maximum LTV/TLTV for a cash-out refinance mortgage. This proposal could provide an avenue for borrowers to access equity in their homes that might come at a lower cost than cash-out refinances or home equity lines of credit (HELOC). FHFA has determined this proposal to be a new product that merits public notice and comment about whether it is in the public interest. MBA appreciates the use of a comment period, which will be essential to evaluate what market this new product serves and to determine additional details such as the loan-level pricing adjustments that would be applied to this product. Written comments will be accepted for 30 days after publication to the Federal Register. Following that 30-day period, FHFA will have 30 days to make a final decision on product approval. MBA plans to submit comments after reviewing the proposal and soliciting feedback from members and will remain engaged with FHFA and Freddie Mac during this process.
Acting HUD Secretary Adrienne Todman and Federal Housing Finance Agency (FHFA) Director Sandra Thompson testified as witnesses at a housing regulator oversight hearing of the full Senate Banking Committee. Among other items, their statements and responses to Senators’ questions covered: the prospect of expanding opportunities for homeownership and affordable rental housing, building climate resilient communities, ending discrimination in housing, HUD’s Fair Market Rents, the conservatorship of the GSEs, incentivizing credit risk transfer at the Fannie Mae and Freddie Mac (the GSEs), FHFA’s Title Insurance Pilot Program, institutional investors purchasing affordable housing, Loan-Level Pricing Adjustment (LLPA) matrix changes, property insurance costs and availability, manufactured housing issues, and the activities and regulation of the eleven Federal Home Loan Banks. A full summary of the hearing can be found here. The Senate Banking Committee is rumored to be scheduling a “mark-up” of various housing-related bills in the near future. The hearing testimony from both these key regulators earlier this week could potentially impact the bills Senators may offer for consideration. Senator Bill Hagerty (R-TN) noted that Director Thompson had stated that lifting the GSEs out of conservatorship would require the building of capital through retained earnings and congressional action. Senator Hagerty also affirmed his belief that former FHFA Director Mark Calabria’s work “needs to be continued,” and that the enterprises should be returned to the private markets. Senator Katie Britt (R-AL) and Thompson discussed that FHFA’s recently-announced Title Insurance Pilot Program has not yet been operationalized and would have limited applicability. Senator Britt stated her firm belief that FHFA should ask for public notice and comment on the proposal before implementing the title pilot. Senator Thom Tillis (R-NC) said Congress may need to consider re-tailoring FHFA’s regulatory authorities regarding required notice-and-comment procedures given last year’s revised LLPA rollout – and the resulting congressional debate. MBA will continue to monitor further information that HUD and FHFA are asked to provide publicly as a result of Senators’ questions at the hearing.
MBA joined the National Association of Home Builders and others in a joint letter to HUD on its Request for Information (RFI) regarding the implementation of the Build America, Buy America Act (BABA) as it applies to HUD’s housing programs using federal financial assistance. The RFI requested specific information on construction materials sourcing, supply issues, and where certain materials used in housing development are manufactured. The coalition letter stressed the significant challenges housing developers face with rising construction costs and the negative outcomes that can result from applying domestic sourcing requirements to HUD’s affordable housing programs. The coalition urged HUD to postpone the implementation of BABA for at least a year and to conduct a thorough impact assessment of its impact on affordable housing supply. MBA will update members on any further developments related to this issue.
The full House Financial Services Committee (HFSC) considered and advanced 13 bills during an extensive legislative “markup.” Included among the full group of measures discussed were several Congressional Review Act (CRA) resolutions to disapprove specific regulatory actions, as well as several bills related to housing, financial innovation, and bank capital standards. MBA shared a letter in advance of the markup with all HFSC member offices to reveal our specific industry views regarding: (1) a CRA resolution to disapprove the Financial Stability Oversight Council’s (FSOC) rule regarding the designation of nonbank financial entities as Systemically Important Financial Institutions (SIFIs); (2) one bill impacting the protection of insurance-related data; and, (3) another bill that corrects a CARES Act drafting error regarding eviction notice requirements for federally-assisted or federally-backed housing. All three of the MBA-supported bills were cleared by the panel. Find additional details here. Examine a joint industry letter signed by MBA and other trade groups in support of the FSOC rule related CRA resolution here. MBA will continue to weigh in on – and seek to advance – our industry’s priority policies in the few remaining HFSC markups expected to be held before the end of the 118th Congress.
The Senate Banking Committee’s Housing, Transportation, and Community Development Subcommittee held a hearing titled, “Challenges in Preserving U.S. Housing Stock.” A hearing summary can be found here. The hearing discussed the urgent need for housing preservation and the challenges that many communities face in safeguarding existing affordable housing. Senators on a bipartisan basis voiced support for grant programs and for legislation such as S. 2790, the Rural Housing Service Reform Act – a bill designed to modernize and improve the U.S. Agriculture Department’s homeownership and rental assistance programs. The Senate Banking Committee may schedule a markup of housing-related legislation in the coming weeks. MBA will continue to push Senators on both sides of the political aisle to encourage taking action on industry priorities.
The House Financial Services Committee’s Financial Institutions and Monetary Policy Subcommittee held a hearing titled, “Agency Audit: Reviewing CFPB Financial Reporting & Transparency.” Lawmakers took familiar, party-line positions on the CFPB and its funding stream. Republicans continued to criticize what they cast as the Bureau’s increasing level of politicization under Director Rohit Chopra. To watch the full subcommittee hearing, click here. To read a full summary of the hearing, click here. Republican lawmakers and their chosen witnesses argued that the Bureau’s “dual-insulated” funding structure (from the Federal Reserve) is unlike that of any other independent financial regulator, rendering it unaccountable to Congress and necessitating that the agency’s funding be subject to congressional appropriations and enhanced oversight. Democrats and their chosen single witness came to the defense of the CFPB’s funding structure, as well as the agency itself — touting its actions on predatory lending and credit card late fees, among other efforts. Democrats also highlighted findings from the Government Accountability Office (GAO) and independent audits of the CFPB’s financial reporting, indicating that the agency is acting in a responsible manner. They likened the CFPB’s funding arrangement to that of other financial regulators — including the Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), and Federal Reserve. MBA will continue to monitor the Bureau’s regulatory and enforcement actions, as well as any proposed legislation designed to create greater transparency at the CFPB.
The House Energy & Commerce Committee’s Innovation, Data, and Commerce Subcommittee held a hearing titled, “Legislative Solutions to Protect Kids Online and Ensure Americans’ Data Privacy Rights.” Both Full Energy and Commerce Chair Cathy McMorris-Rodgers (R-WA) and Ranking Member Frank Pallone (D-NJ) spoke in favor of the data privacy bill known as the American Privacy Rights Act (APRA). The APRA would establish a comprehensive framework for a national data privacy standard designed to protect consumer data privacy and security and create new requirements for covered entities. MBA has identified several problems with the bill’s current text, including 1) an incomplete carveout of Gramm-Leach-Bliley Act (GLBA) covered entities; 2) an exemption from federal preemption for certain provisions contained within specific state privacy laws; 3) the proposal’s private right of action provision; and 4) the proposal’s provision allowing for a request to substitute manual underwriting as an alternative to an evaluation by algorithm for “consequential decisions.” The U.S. Chamber of Commerce sent a letter to subcommittee leaders before the hearing outlining the proposal’s major drawbacks. Though chances for enactment of major federal data privacy legislation are slim this Congress, MBA will work with its members and industry trade association partners to enumerate our positions on APRA before any full Energy and Commerce Committee (or subcommittee) “mark-up” of the bill (deemed likely in a few weeks).
The Department of Veterans Affairs (VA) released its foreclosure prevention solution, the Veterans Affairs Servicing Purchase (VASP) program. VASP is a purchase/modification program designed to assist seriously delinquent Veterans for whom existing VA home retention tools do not provide relief due to rising interest rates. To carry out VASP, the VA updated their Servicing Handbook and Home Retention Waterfall. VASP requires servicers to identify eligible loans, modify them to a 2.5% rate and a 30- to- 40-year term, and then sell the loan to the VA. According to the VA, approximately 40,000 Veterans are expected to qualify for VASP initially. Servicers can begin to send VASP submissions to the VA beginning May 31, 2024, and have until October 1, 2024, to carry out the new program. MBA has been closely following the development of VASP since the October 2022 sunsetting of the COVID-19 Veterans Assistance Partial Claim program. To assist the VA team, MBA previously requested that VA utilize a public process to develop the VASP program to ensure Veterans receive timely payment relief and that servicers can successfully implement the program. In the absence of VASP and a permanent partial claim, the VA last fall instituted - and servicers implemented - a voluntary foreclosure moratorium that lasts until May 31, 2024. MBA continues to urge the VA to work with Congress to adopt a VA Partial Claim program. MBA believes that VA’s loss mitigation program should include both VASP and a partial claim to provide servicers and Veterans with durable solutions that help struggling homeowners avoid foreclosure in any market. In a press statement, MBA President and CEO, Bob Broeksmit, CMB, said, “Servicers will work diligently to modify their systems and operations and train their staffs to implement the program by the VA’s deadline” and that “MBA will work with the VA to ensure VASP delivers what is promised without placing undue operational and cost burdens on servicers and Veterans.” He added, “We appreciate the VA’s release of resources and planned training for the program and call on them to be flexible on timing and receptive to industry feedback on refinements that may be needed.” MBA will remain engaged with the VA team to ensure that servicers receive the necessary information to successfully transfer VASP loans to VA’s contractor and implement the program. MBA will also conduct a comprehensive review of the VASP policy and provide comments to the VA.
Two House panels – the Ways and Means and Small Business Committees – heard from witnesses discussing the direct effects of either extending or altering key policies contained within the Tax Cuts and Jobs Act (TCJA) that are set to expire in 2025. Though both hearings reflected a consensus that maintaining a consistent and stable tax code is important for American individual filers and businesses, they also provided platforms to relitigate tax policy disagreements from the Bush, Obama, Trump, and Biden administrations – all with the potential to impact MBA members and their business operations going forward. For example, questions at both hearings focused on the importance of the current law Section 199A small business “pass through” deduction against Qualified Business Income (QBI), including a discussion on legislation designed to make the provision permanent. MBA has been communicating regularly our tax policy concerns on specific issues important to real estate finance, including recent letters to Capitol Hill (found here and here) on issues such as indexing the capital gains exclusion on the sale of a principal residence for inflation and maintaining current law treatment for Section 1031 Like Kind Exchanges, respectively. A full summary of the House Small Business Committee hearing may be found here. As Congress moves closer to the TJCA 2025 expiration date, conversations on tax policy will intensify and MBA will continue to elevate the industry’s priorities.
MBA submitted a joint amicus brief in Ritz v. Nissan to the Third Circuit Court of Appeals. MBA argues that credit furnishers do not need to investigate legal disputes under the Fair Credit Reporting Act (FCRA) when investigating the accuracy of reported information. In the Brief, MBA argues that the text, structure, history, and purpose of FCRA demonstrate that the law requires furnishers and credit reporting agencies (CRA) to only verify factual inaccuracies without needing to resolve legal questions. FCRA’s references to inaccuracies, incomplete information, investigations of disputed information are best understood as referring to factual information. Additionally, requiring credit furnishers and CRAs to determine legal disputes would require those entities either engage in determinations for which they have little training or to dramatically increase the number of legal staff. Legal disputes are thus best left to the courts to resolve. This case may create a further circuit court split on this issue. MBA previously filed an amicus brief on the same issue in the Eleventh Circuit in the case Holden v. Holiday Inn. MBA will continue to monitor this lawsuit and provide updates as needed.
MBA and ABA submitted a joint comment letter in response to the Federal Emergency Management Agency’s (FEMA) proposed changes to its Standard Flood Insurance Policy form. FEMA proposes to create a new form – the Homeowner Flood Form – to supersede the existing Dwelling Form for homeowners of one-to-four family residences. The letter urges FEMA to work with federal prudential regulators and federal housing programs before finalizing the proposal to ensure that the implementation and utilization of the new form is consistent with lender and servicer obligations under the Federal Disaster Protection Act and investor/guarantor requirements. While the new form is generally more user-friendly, some changes, such as revising the definition of “Flood”, will present operational and compliance challenges that may require updating private insurance policies to ensure they are “at least as broad as” coverage under the new form. MBA will remain engaged with FEMA, federal housing agencies, and regulators to ensure these concerns are addressed prior to finalization of the new form.