MBA State Relations Committee Update Federal Highlights

Republicans Win White House, Senate Majority, and Retain House Majority: Following Tuesday, November 5’s decisive election results, Donald Trump will return to the White House as the 47th President of the United States after exceeding his 2020 popular vote and Electoral College tallies, including sweeping all seven battleground states. Republicans are set to control the Senate with at least a 53-seat majority, pending finalized results in Pennsylvania. The final tally in the House of Representatives is still up in the air following both Democratic and Republican seat “flips” in various individual districts, but Republicans will keep their majority with a very likely narrow governing margin (depending on outcomes in several Western states). A Trump administration and Republican control of both chambers of Congress could lead to sweeping attempts at changes to regulatory and legislative policy in 2025 and beyond, from tax reform, increased interest in GSE reform, and new leadership at HUD, the Consumer Financial Protection Bureau (CFPB), Federal Housing Finance Agency (FHFA), and Treasury, among other key considerations. MBA will provide a deeper analysis in the near future on the full outcome of the national election – and what it means for real estate finance. In the meantime, register for the next Mortgage Action Alliance (MAA) Quarterly Webinar: Post-Election Briefing on Wednesday, December 4, from 3:00pm - 4:00pm ET. You’ll hear from a panel of experts as they reflect on the outcome of the election and how to prepare for what's ahead next year for our industry on the policy front.

FHA Actuarial Report Shows Strong Performance; MBA Advocates for MIP Cut: Earlier today, the Department of Housing and Urban Development (HUD) released its Annual Report to Congress on the financial status of the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund (MMI Fund). The report announced a strong combined capital ratio of 11.47% – a slight increase from the 10.51% level in 2023 and well above the statutory minimum of 2.0%. MBA’s President and CEO Bob Broeksmit, CMB, in a press statement said, “Quality underwriting and effective risk management and loss mitigation efforts by HUD, FHA lenders, and mortgage servicers continue to support a healthy FHA program that has a high capital reserve ratio and low delinquency levels.” Broeksmit added, “At 11.4%, the Mutual Mortgage Insurance Fund is more than five times the statutory minimum reserve ratio. While it is sensible to have a healthy cushion above the 2% minimum reserve, qualified borrowers should not be charged higher mortgage insurance premiums (MIP) than necessary. “In addition to pursuing more program enhancements to boost housing supply and affordability, such as this year’s 203(k) program updates, borrowers would see meaningful payment relief from FHA eliminating its life of loan premium requirement and making another reasonable cut to the MIP.” A healthy FHA program is necessary to ensure the broad availability of sustainable mortgage credit to low- and moderate-income households, minority borrowers, first-time homebuyers, and other historically underserved communities. The strength of this year’s annual assessment of the health of the MMI Fund provides an opportunity for HUD to consider further changes to the level and structure of FHA premiums to reduce costs to borrowers while maintaining strong reserves above the minimum. MBA will work with HUD – and the incoming Trump administration – as they evaluate any potential changes to FHA pricing and will continue to advocate for other program updates that boost supply and improve affordability.

Ginnie Mae Issues Guidance on Risk-Based Capital Relief for Effective MSR Hedging: Tuesday, November 5, Ginnie Mae released an All Participants Memo (APM) finalizing risk-based capital relief for issuers based on their hedging activities. The guidance addresses some of MBA’s concerns with the upcoming implementation of Ginnie Mae’s risk-based capital ratio (RBCR) requirement. In 2022, Ginnie Mae issued an APM announcing the implementation of a new RBCR standard for certain issuers and applicants beginning on December 31, 2024. MBA’s initial feedback noted that the requirement, as implemented, was excessive and would have a significant, negative impact on issuers and the broader MSR market. The relief provided in the APM allows an Issuer to essentially reduce the risk-weighted value of its mortgage servicing rights (MSR) based on the efficacy of its MSR hedging activities, which would then result in lower “excess MSRs” (as defined by Ginnie Mae). This, in turn, would boost the Issuer’s RBCR. Ginnie Mae convened several stakeholder meetings with MBA members during the development of the APM, which allowed issuers to provide direct feedback at various stages of the process. MBA’s goal was to ensure that this new RBCR requirement provided capital relief for effective risk reduction activities by issuers, while protecting Ginnie Mae’s interests and mitigating unintended negative consequences for the MSR market and the cost of credit for borrowers. The APM is effective immediately for Issuers that have any history of hedging prior to its release. Issuers that have not historically hedged their MSRs should discuss the APM with their Account Executive.   

Federal Reserve Cuts Rates by 25 Basis Points; Second Rate Cut of 2024: Softer inflation data and higher unemployment gave the Federal Reserve enough evidence to cut short-term rates by another 25 basis points on Thursday to a target range of 4.50% to 4.75%. The move comes after a 50-basis-point cut in September. The FOMC stated that it “will continue to monitor the implications of incoming information for the economic outlook” and “would be prepared to adjust the stance of monetary policy as appropriate.” Michael Fratantoni, Ph.D., MBA SVP and Chief Economist, said "MBA expects that mortgage rates will remain within a fairly narrow range over the next year, with mortgage rates moving higher on signs of economic strength and more stimulative fiscal or monetary policy, or lower if it's the opposite." Read his full commentary here.

MBA Calls for Regulation X Servicing Reform Prioritization: Earlier this week in a guest column on MBA NewsLink, MBA’s Director of Loan Administration Brendan Kelleher called for the CFPB to prioritize Regulation X Servicing reform for next year. The column calls on the CFPB to finalize its proposed amendments to the mortgage servicing rules, but with improvements to encourage homeowner engagement. Earlier this summer, the CFPB proposed amendments to the servicing rules under Regulation X that significantly alter the loss mitigation framework that governs the compliance procedures servicers must follow to provide borrowers with foreclosure protections during the loss mitigation process. The Bureau also proposes to prohibit servicers from recovering servicing fees and third-party costs, as well as a ban on advancing the foreclosure process in order to incentivize servicers to engage borrowers during their delinquency. While modernizing Regulation X has been a top priority for the mortgage servicing industry with the increased use of streamlined loss mitigation solutions in investor waterfalls, this incorrect framing would result in unfortunate and unhelpful outcomes. MBA encourages the Bureau to finalize its proposal with improvements to motivate homeowners to contact their servicers and pursue loss mitigation assistance early in the default process. Echoing the sentiment of MBA’s original comments, MBA believes the CFPB must provide clear and reasonable parameters for servicers to determine when dual tracking protections begin and end under the new “loss mitigation review cycle,” reinstate Regulation X’s existing “one review per delinquency” standard, and eliminate the prohibition on fees. MBA will continue to monitor and communicate any new developments on this issue.