MBA State Relations Committee Update Federal Highlights

CFPB Latest - APOR Published; Jonathan McKernan Emerges as New Nominated Director of CFPB: Last Tuesday evening, Jonathan McKernan was nominated to serve as the permanent Director of the Consumer Financial Protection Bureau (CFPB). McKernan was most recently a member of the Board of Directors of the Federal Deposit Insurance Corporation (FDIC). He also has deep housing finance experience from his past work at the Federal Housing Finance Agency (FHFA) and Treasury Department – and during his work in the Senate. Until McKernan is confirmed by the full Senate, the agency will continue to be led by Acting Director Russell Vought, who was appointed to the role last weekend and also serves as the now fully confirmed Director of the Office of Management and Budget. In a press statement on McKernan’s nomination, MBA’s Broeksmit said, “MBA looks forward to working with him and his staff to ensure that the agency operates within its statute to protect consumers in a manner that is transparent, fair, and supports competitive markets for financial products, including mortgages.” This week, Acting Director Vought issued an even more expansive and prescriptive memorandum than the one Treasury Secretary Scott Bessent sent a week earlier to CFPB staff. The memorandum explicitly halts all ongoing, pending or planned rulemaking, guidance and bulletins, research reports, enforcement actions, examinations, and litigation. Stakeholder outreach and communications are also suspended. In addition, although the CFPB website landing page returns a 404 error, all other materials on the website remain available for now. Last Tuesday, MBA and industry stakeholders voiced members’ immediate concerns to the CFPB regarding this Thursday’s publication of the Average Prime Offer Rate (APOR), highlighting the numerous compliance obligations that rely on APOR as an input. The CFPB clarified its intent to continue to publish APOR data and did so yesterday. Rules or guidance issued under previous Director Chopra’s regime could be modified or rolled back and enforcement actions dropped. Changes to rules will still require the regulatory process with proposed rulemakings, but guidance and advisory opinions can be removed or altered quickly. While significant changes at CFPB are needed, MBA has urged the Administration to ensure that process carefully evaluates the impact on the mortgage and housing ecosystem to ensure: No disruptions to market utilities like APOR and Home Mortgage Disclosure Act (HMDA) submissions; and problematic rules like Loan Officer Compensation are reformed to lower compliance costs, promote competition, and pass savings along to prospective homeowners. MBA is monitoring the ongoing developments at the CFPB and is engaging with the Trump administration to better understand the review of the agency’s activities and future priorities and the impact on housing finance and regulatory enforcement actions.

Fed Chair Powell Provides Semi-Annual Report to Congress: Last Tuesday and Wednesday, the Senate Banking Committee and House Financial Services Committee, respectively, held their semi-annual hearings with Federal Reserve Chair Jerome Powell. The hearings covered a wide range of topics including monetary policy, digital assets, financial crime, Basel III Endgame, consumer protection, supply chains, and the future of the housing GSEs. At the Banking Committee hearing, Senator Mike Rounds (R-SD) asked about the status of the Basel III Endgame, to which Powell responded that the Federal Reserve remains committed to completing Basel III and is currently awaiting new leadership getting underway at the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. He also responded to Senator Rounds’ question about the Endgame remaining capital neutral, adding that “it’ll shake out somewhere in that area.” Senator Jack Reed (D-RI) asked if the federal guarantee of the GSEs makes housing more attainable and more accessible. Powell responded that he does believe this helps hold down mortgage rates. Additionally, Powell said that over the longer run, privatizing the GSEs “has some appeal,” but he indicated that it is a decision for lawmakers. Senator Jim Banks (R-IN) discussed the rising cost of homeownership. Powell noted that while the Federal Reserve affects housing prices through interest rates, many cost inputs occur at a state and local level through regulations, as well as inflation. Powell also agreed with Senator Catherine Cortez Masto (D-NV) that a significant supervisory gap exists for so long as work is halted at the CFPB. At the House hearing, Committee Chairman French Hill (R-AR) voiced substantial apprehension that the Basel III proposal could undermine the competitiveness of American banks. Powell committed to revisiting the rule, with a focus on ensuring capital neutrality in any revised version. Representative Brad Sherman (D-CA) asked whether higher mortgage rates would result from a lack of an explicit or implicit guarantee for the GSEs. Powell said, “Since you’d no longer be borrowing on the credit of the United States . . . it could lead to that.” Powell added that privatizing Fannie and Freddie “might have other virtues too.” Summaries of both hearings may be found here and here. The Federal Reserve is a key player in the federal regulations and guidance impacting the housing finance industry, as well as setting interest rates. President Trump has indicated he may seek to replace Chair Powell at some point, but at the hearing, Powell reiterated his belief that the President is unable to remove the Chair of the Federal Reserve. Chair Powell also discussed several other matters of interest during the two hearings, including that he believes in pursuing regulatory tailoring based on bank size and that he is extremely concerned with the trend of insurance providers and banks pulling out of areas at-risk for natural catastrophes. MBA will continue to actively engage with the Federal Reserve, the Senate Banking Committee, and the House Financial Services Committee on matters important to the housing finance industry.

Senate Confirms Scott Turner as HUD Secretary, Doug Collins as VA Secretary: The full Senate voted to confirm Scott Turner as Secretary of the Department of Housing and Urban Development (HUD) on February 5 and Doug Collins as Secretary of the Department of Veterans Affairs (VA) on February 4. MBA's President and CEO Bob Broeksmit, CMB, congratulated Secretary Turner in a press statement. Secretary Turner has said he plans an expansive review of HUD to look for ways to eliminate inefficiencies and to streamline its single-family and multifamily lending programs. He also plans on exploring options for building on federal lands, easing regulations to help lower housing costs, utilizing Opportunity Zones and other tax incentives for affordable housing, prioritizing economic revitalization and financing of commercial real estate, and encouraging state and local governments to do what they can to lower housing costs. Per press accounts earlier this week, Secretary Turner is likely to play a role in working with the Treasury Department, the Federal Housing Finance Agency (FHFA), and the Congress on any plan to release Fannie Mae and Freddie Mac (the GSEs) from conservatorship. Treasury Secretary Scott Bessent also weighed in on GSE reform this week, noting in an interview that GSE reform is behind tax matters in priority and that “the most important metric [for Fannie/Freddie release] … is any study or hint that mortgage rates would go up.  Anything done around a safe and sound release is going to hinge on the effect on long term mortgage rates.” Bessent’s remarks align with MBA’s views on the need to avoid market disruption in the path toward release. Secretary Collins and his team will be tasked with overseeing and making improvements to VA Home Loan Program origination and servicing policies. MBA will continue to work with leadership and staff at HUD and the VA on policies and initiatives that improve housing supply and affordability and the agencies’ lending and loss mitigation programs. MBA will remain engaged with policymakers on the importance of a careful and deliberate release of the GSEs from conservatorship that involves key reforms such as a federal backstop on GSE mortgage-backed securities and a mandate that FHFA require the GSEs to maintain a level playing field for all sellers and servicers.

MBA, Trades Respond to CFPB Proposed FCRA Data Broker Rule: On Monday, February 3, MBA joined a broad-based industry letter in response to the recent CFPB proposed rule amending Regulation V – which implements the Fair Credit Reporting Act (FCRA) – asking the CFPB to withdraw the proposal. The proposed rule would significantly expand the definition of consumer reporting agency to – as a matter of practice – include most data brokers and arguably mortgage lenders in some cases. The proposed rule would also expand the definition of consumer report to include credit header data and place new restrictions on the permissible purposes for using a consumer report. MBA’s summary of the proposed rule is available here. In the letter, the industry groups emphasized that the proposed rule conflicts with the statutory language of FCRA and exceeds the statutory framework created by Congress, does not create exceptions for beneficial use cases such as combatting identity fraud, and does not provide a sufficient cost-benefit analysis. MBA plans to send an additional response focusing on the mortgage-specific issues of the rule.

Community Banking and Mortgage Lending Under Scrutiny in House Financial Services Hearing: On Wednesday, February 5, the House Financial Services Committee (HFSC) held a hearing titled, "Make Community Banking Great Again," which examined community banks' regulatory challenges and discussed potential legislative solutions. Lawmakers debated proposals aimed at easing regulatory burdens, promoting new bank formation, and reforming the CFPB. A summary of the hearing can be found here. Lawmakers called for reducing compliance costs for community banks, including raising Bank Secrecy Act/Anti-Money Laundering (BSA/AML) reporting thresholds and adjusting CFPB rules affecting smaller lenders. Concerns were raised about regulatory barriers limiting community banks’ participation in housing finance, especially multifamily lending. Proposals included easing GSE program access and adjusting regulatory thresholds to expand mortgage credit. The CFPB’s Section 1071 rule faced criticism for its potential to raise compliance costs and restrict credit. The 1071 Repeal to Protect Small Business Lending Act was introduced as a countermeasure by Rep. Roger Williams (R-TX) (see more in previous blurb). Regulatory uncertainty in commercial real estate was highlighted by Democrats as a challenge for community banks, with direct implications for mortgage lending and housing market stability. Despite partisan divides, there was bipartisan agreement on addressing financial fraud and streamlining BSA/AML compliance. MBA continues to support policies that ensure its community bank members can provide critical mortgage credit – while maintaining strong consumer protections. MBA will remain engaged with HFSC members to advocate for balanced regulatory measures that support community banks and their multifamily lending capacities.

Federal Reserve Releases 2025 Bank Stress Test Scenarios: On Wednesday, February 5, the Federal Reserve Board released the hypothetical scenarios for its annual stress test, which analyzes large banks’ ability to lend to households and businesses even in a severe recession. The annual stress test evaluates the resilience of large banks by estimating losses, net revenue, and capital levels under scenarios that extend two years into the future. Twenty-two banks this year will be tested against a severe global recession with heightened stress in both commercial and residential real estate markets, as well as in corporate debt markets. The Fed also reiterated that it will soon take steps to reduce the volatility of stress test results and begin to improve model transparency in the 2025 stress test. A public comment process on its comprehensive changes is expected later this year. The Fed also released two hypothetical elements designed to probe different risks through its "exploratory analysis" of the banking system. One of the hypothetical elements will examine banks’ reaction to credit and liquidity shocks in the non-bank financial institution sector during a severe global recession. The second hypothetical includes a market shock that hypothesizes the failure of five large hedge funds with reduced global economic activity and higher inflation. While the Federal Reserve indicated that the exploratory analysis will not affect bank capital requirements, there is some concern that the results could be leveraged in a way that enables Fed supervisors to pressure big banks to keep capital even higher than current requirements. MBA will monitor the results – and any developments – that derive from the “not binding” hypothetical elements.  MBA appreciates the Federal Reserve’s plans to increase transparency and reduce volatility in stress test results and looks forward to the reviewing and participating in the next steps on this effort.