MBA State Relations Committee Update Federal Highlights
Advocacy News and Information from the Latest Issue of the MBA State Relations Committee Update
The Federal Reserve in its ongoing efforts to slow inflation decided to hold the federal funds rate to a target range of 5.25-5.50% on Wednesday. The FOMC emphasized that, “the Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion. The Committee will maintain the monthly redemption cap on agency debt and agency mortgage‑backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities.” Read MBA SVP and Chief Economist Mike Fratantoni’s full statement here.
Treasury Secretary Janet Yellen testified before the House Ways & Means Committee to detail President Joe Biden’s Fiscal Year (FY) 2025 Budget request. Her statements and responses to committee members’ questions covered: the Biden administration’s tax proposals; the expiration and potential renewal of key provisions of the 2017 Tax Cuts and Jobs Act (TCJA); the implementation of the Inflation Reduction Act (IRA); the need for expansion and improvement of the Low-Income Housing Tax Credit (LIHTC) program; and additional key economic and tax policy issues. A full summary of the hearing can be found here. Yellen's testimony and question and answer session touched on various aspects of economic policy that impact the mortgage banking industry – from proposed tax incentives that affect housing affordability to supply chain resilience and IRS modernization. Treasury Secretary Janet Yellen unveiled the Biden FY25 “Green Book,” which contains an annual inventory of key tax proposals and their accompanying federal revenue and economic impacts. The hearing dialogue between Yellen and committee members provided a preview of the expected tax debate regarding TJCA provisions in 2025 – including the consideration of proposals that could materially impact the real estate finance industry writ large.
The Federal Housing Finance Agency (FHFA) announced a Final Rule addressing fair lending practices and oversight and Fannie Mae and Freddie Mac’s (the GSEs) Equitable Housing Finance Plans (EHFPs). The final rule, which formalizes many existing requirements related to fair lending, codifies in regulation the EHFPs, the required collection of homeownership education, housing counseling, and language preference information from the Supplemental Consumer Information Form (SCIF), and adds oversight of unfair or deceptive acts or practices (UDAP) to FHFA’s fair housing and fair lending oversight programs. Along with this announcement, FHFA also published the GSEs’ 2024 EHFPs as well as their 2023 EHFP Performance Reports. The rule also includes equitable housing requirements for the Federal Home Loan Banks. MBA welcomed FHFA’s proposal to codify the EHFPs and their associated practices into regulation, however we expressed concern regarding FHFA’s use of unfair or deceptive acts or practices (UDAP) as a standard for Fair Housing and Fair Lending Compliance. FHFA addressed these concerns and provided language clarifying that their UDAP authority only extends to the regulated entities and is not intended to interfere with or add regulation for primary market entities that are already subject to this regulation. The Final Rule is effective 60 days after publication to the Federal Register with the exception of the requirement that the Federal Home Loan Banks provide reporting on their efforts to address barriers to sustainable housing opportunities, which goes into effect February 15, 2026. MBA will continue to review the final rule in the coming days to determine the full scope of its impacts. MBA looks forward to continued engagement with FHFA on this and other critically important housing issues.
HUD, in alignment with Fannie Mae and Freddie Mac, (the GSEs) published their guidelines concerning Reconsideration of Value (ROV) for appraisals. These guidelines require lenders to establish an ROV process for borrowers to dispute appraisals and provide them with a comprehensive disclosure outlining the ROV procedure at the loan application stage. Furthermore, lenders must standardize communication with appraisers and set a timeframe for ROV responses. The rules also set standards for how to handle allegations of appraisal bias. Although lender requirements are consistent, there exists a disparity between Federal Housing Administration (FHA) and the GSEs regarding the party responsible for covering the cost for the second appraisal. While the GSEs have not specified, FHA prohibits borrowers from incurring this expense. Borrowers will be able request one ROV request per appraisal. A ROV is a request to an appraiser to re-assess the appraised value of a property due to potential appraisal reporting deficiencies or inappropriate selection of comparable properties, or based upon additional information the appraiser should consider. The GSE guidelines will become effective on August 29, 2024, while FHA's will take effect on September 2, 2024. MBA will continue to engage with HUD, the VA, the USDA, and the GSEs and gather member feedback on loan production issues through the Residential Loan Production Committee and Government Loan Production Subcommittee.
Acting Secretary Adrianne Todman testified before the Transportation and HUD (T-HUD) subcommittees of the House and Senate Appropriations Committees on HUD’s FY 2025 budget request. A summary of the Senate hearing can be found here. A summary of the House hearing can be found here. Todman fielded questions on the FY 2025 budget request’s funding for proposals designed to expand the nation’s housing supply, address zoning barriers, disaster assistance, and a series of potential programmatic reforms. Both Democrats and Republicans emphasized the importance of expanding the nation’s housing supply within the constraints of a “flat” HUD budget. Congress will proceed to markup the twelve individual FY 2025 appropriations bills – including House and Senate versions of the T-HUD funding measure. MBA has submitted its annual letter to appropriators outlining priorities for the HUD budget (as well as Veterans Affairs (VA) and the Department of Agriculture (USDA) budget proposals) that impact MBA members who utilize the key federal housing programs.
Freddie Mac announced that it updated requirements for using attorney opinion of title letters (AOLs). Specifically, Freddie Mac has expanded the types of mortgages that are eligible for delivery with an attorney opinion of title letter, including:
- Mortgages secured by a property located in all U.S. jurisdictions, unless prohibited by law or identified as an ineligible transaction type in Section 4702.3
- Mortgages secured by a unit in a Condominium Project,
- Mortgages secured by a property subject to restrictive agreements or restrictive covenants, and
This Guide update also includes additional specificity for both the attorney opinion of title letter and attorney requirements. Guide impacts occur in Sections 4702.1, 4702.3, 4702.4 and 4702.7. This announcement removes one of the largest identified impediments to the broader adoption of AOLs - the customarily accepted geographical requirements - on the Freddie side. The acceptance of AOLs for condos and in areas with deed restrictions also potentially enables broader usage. These changes are a necessary pre-condition for the possible broader adoption of AOLs on Freddie Mac loans, but it remains to be seen whether lenders will choose to use them, or customers will be aware of the option. MBA continues to monitor developments in the title insurance space.
MBA and National Reverse Mortgage Lenders Association (NRMLA) submitted a joint comment letter in response to HUD's request for comments on FHA's HECM application and origination documents. The letter supports HUD's proposed transition to Form 1003 and Form HUD 92900-A with Form HUD 92900–C for reverse mortgages. However, MBA and NRMLA emphasize the importance of soliciting HECM mortgagees’ feedback on the new HUD 92900-C before switching from the FNMA-1009/HUD 92900-A. Additionally, we request that HECM mortgagees be given a minimum of 120 days to implement the new forms. HUD’s proposed changes closely align HECM loans with FHA forward mortgages while further ensuring the safety and soundness of the Mutual Mortgage Insurance Fund (MMI) and the interests of seniors and potential borrowers. MBA will continue to engage with HECM mortgagees and HUD on opportunities to ensure that the borrowers are clear on the HECM product features and the durability of the FHA MMI Fund.
Current MBA COMBOG Chairman Jeff Weidell, CEO of Northmarq, testified before the House Oversight & Accountability’s Health Care & Financial Services Subcommittee at a hearing titled, “Health of the Commercial Real Estate Markets and Removing Regulatory Hurdles to Ensure Continued Strength.” Read Weidell’s written and oral statements here and here; watch a recording of the hearing here. Weidell’s testimony and responses to lawmakers’ questions centered on the need for changes to the Department of Housing and Urban Development’s (HUD) “hidden and unnecessary fees, which make it a multifamily lender ‘of last resort.’” He also indicated support for increasing affordable housing stock through tax changes that facilitate office conversions, and a reproposal of the Basel III Endgame proposed rule. Weidell drew careful distinctions between today’s current CRE market conditions versus those of the Great Recession in an extended “question and answer” dialogue with the subcommittee’s Chair and Ranking Member near the close of the hearing. MBA will continue to work with elected officials and regulators on impactful ways to continue to maintain an appetite for investment in commercial real estate – and increase the supply of affordable rental housing.
The U.S. District Court for the Western District of Missouri granted preliminary approval of the National Association of REALTORS® (NAR) proposed settlement agreement that would end litigation of claims against NAR and most of its members brought on behalf of home sellers related to broker commissions. Plaintiffs filed a motion last Friday for preliminary approval of the settlement agreement in the Western District of Missouri. The court approved the motion, calling the agreement “fair, reasonable and adequate.” The plaintiffs’ filing initiated the 60-day period during which all REALTOR®-owned MLSs, brokerages with total residential transaction volume above $2 billion in 2022, and non-REALTOR® MLSs that want to be covered by the settlement must submit an opt-in agreement by June 18. The practice changes set forth in the settlement agreement are slated to take effect in late July of this year, and class notice will take place no earlier than August 17, 2024. The settlement is still subject to final court approval, which is currently set for November 26, 2024. An estimated timeline of key upcoming milestones is available here. Read MBA’s March 2024 summary of the settlement and watch the previously-recorded webinar. Class members are now temporarily enjoined from filing, commencing, prosecuting, intervening in, or pursuing as a plaintiff or class member any claims against NAR or any released party. This prohibition applies to any and all claims, regardless of the cause of action, arising from or relating to conduct that was alleged or could have been alleged in the Sitzer-Burnett and the other settled Actions based on any or all of the same factual predicates for the claims alleged in those Actions. MBA is diligently working with NAR to pursue next steps and to limit any disruption to members. MBA continues to monitor this landmark settlement and the evolving impact it could have on buyers, sellers and their agents, and in turn on home purchase financing.
The Consumer Financial Protection Bureau (the Bureau) published a Spring edition of its Supervisory Highlights focused solely on mortgage servicing. The Bureau’s report generally highlights improper assessments of fees and violations of the loss mitigation process. The latest Supervisory Highlights report covers examinations that were completed from April 1, 2023, through December 31, 2023. According to the report, Bureau examiners found that some of the examined servicers either violated the Bureau’s statutory prohibition against unfair, deceptive, and abusive acts and practices, or the servicing provisions of Regulation X. Several highlights include, among others, that servicers:
- Assessed unauthorized property inspection fees or late fees, either when such inspections were prohibited by investor guidelines, or the late fees exceeded the amount allowed in the loan agreement.
- Failed to waive late fees and charges for consumers that accepted a COVID-19 streamline modification.
- Improperly evaluated consumers for a loss mitigation option by sending consumers their approval notice for a streamlined loss mitigation option even though the servicers had not yet determined their eligibility.
The findings appear to involve minor infractions that have been remediated by the servicer. Separately, the Bureau is also expected to conduct potential rulemaking to amend the servicing rules of Regulation X. More importantly, the Bureau’s press release, titled, “CFPB Takes Action to Stop Illegal Junk Fees in Mortgage Servicing,” continues the Bureau’s frustrating narrative against mortgage servicers by inappropriately ascribing isolated instances of noncompliance as a general state of the industry. Mortgage servicers constantly updated their processes to provide mortgage forbearance for 8.5 million homeowners during the pandemic and helped transition borrowers to a successful exit. To make these changes, servicers also executed robust risk management practices to ensure compliance with ever-changing servicing guidance. MBA's SVP for Residential Policy and Strategic Industry Engagement, Pete Mills, expressed MBA’s disappointment in a LinkedIn post yesterday, stating, "The Bureau's overwrought press release does a disservice to consumers by further sowing fear and distrust of their mortgage servicer. The gathering of infrequent complaints – since remediated – to paint an inaccurate narrative of an entire industry is another unfortunate example of the CFPB using dramatic and harmful rhetoric via press release." MBA will keep members informed of any updates.
The Department of Housing and Urban Development (HUD) published its final rule on Minimum Property Standards for Federal Housing Administration-insured (FHA) properties. The new policy expands the floodplain of concern, requiring most properties located within it to elevate residential living space an additional two feet to the base flood elevation (the 100-year, or 1-percent-annual-chance flood elevation) for non-critical actions and by adding an additional three feet to the base flood elevation for critical actions. While MBA and its members support efforts to combat climate change, the costs associated with this rule could result in higher costs or reduced supply, exacerbating affordable housing conditions. MBA had urged HUD to reconsider the rule during the proposed rule stage. A summary of the final rule is available here. In a press statement, MBA President and CEO Bob Broeksmit, CMB, said, “At a time when housing markets across the country continue to suffer from weakening affordability, supply shortages, and rising property insurance costs, we are disappointed that several aspects of the final rule will slow housing production and ultimately increase costs for homeowners, renters, and builders.” The effective date for most properties is January 1, 2025. MBA will continue to work with HUD to limit the impact of these new regulations.
HUD published its final rule on Energy Efficiency Building Standards. The new rule will require any new construction with FHA-insured and Department of Agriculture-guaranteed (USDA) financing to use significantly newer building codes that most states have yet to adopt. MBA previously urged HUD and USDA to reconsider the impact of this proposal on affordable housing. Newly constructed single-family homes must soon comply with the 2021 International Energy Conservation Code (IECC) in order to be eligible for FHA or USDA financing. Notably, only five U.S. states have adopted the 2021 code. 32 states are still on the 2009 code or earlier. The rule is effective for building permit applications starting December 2025, which is a delay from the six-month implementation period that was previously proposed. An additional compliance period (i.e., until December 2026) will be provided in “persistent poverty rural areas” as defined by USDA’s Economic Research Service (essentially persistent poverty census tracts located in rural counties). MBA will continue to highlight its concerns with the policy – and in particular its implications for housing costs – in conversations with FHA, USDA, the White House, and on Capitol Hill.
MBA and other trades sent a joint letter to the Federal Communications Commission (FCC) explaining why the FCC should deny the National Consumer Law Center’s (NCLC) request to require an opt-out mechanism on all artificial or prerecorded calls. Under the Commission’s existing Telephone Consumer Protection Act (TCPA) rules, a caller is required to provide an opt-out mechanism when making an artificial or prerecorded telemarketing voice call or an informational call to a residential line. MBA members respect and carry out customer requests to opt out of receiving artificial or prerecorded voice calls or text messages. However, NCLC’s request to require an automated opt-out mechanism during all calls would impair the ability of consumers to receive important information from the companies with which they do business (such as, suspicious activity alerts, notices of data breaches, past-due alerts, multifactor authentication texts and notices of payments due). It would also detract from the customer experience, and – particularly in light of the FCC’s recent Revocation Order – provide little, if any, benefit to consumers. Under the FCC’s rules, when an automated opt-out message is required, it must be played immediately after the caller identifies itself and before any substantive content is presented. If the called party utilizes the opt out, the caller must immediately hang up and ensure that the called party's number is added to the company's internal "do not call" list. This timing provides little, if any, opportunity for the caller to identify the nature or content of the call, potentially encouraging the called party to opt out reflexively before realizing that the message contains useful or important information. The requirements of the Revocation Order magnify this concern because a consumer’s opt out, by default, applies to all future consented-to messages, not solely to messages within the same category of message to which the opt out was directed. MBA will continue to monitor further developments and will notify members accordingly.