MBA State Relations Committee Update Federal Highlights

MBA Proposes Ginnie Mae Early-Buyout Securitization to Improve Issuer Liquidity: MBA last week proposed the development of a new Ginnie Mae security designed to attract more private capital sources of liquidity to support Ginnie Mae issuers in the event of market stress or a severe economic downturn. Read the press release. Under MBA’s proposal, an early-buyout (EBO) securitization would be comprised of non-performing Federal Housing Administration (FHA), Veterans Affairs (VA), and USDA loans bought out of traditional Ginnie Mae pools. “An EBO security addresses the timing mismatch within Ginnie Mae’s program, helping to alleviate an ongoing issue that has concerned issuers and regulators alike. It also has the potential to increase the value of Ginnie Mae servicing, which could translate into lower costs for FHA, VA, and USDA borrowers,” said MBA President and CEO Bob Broeksmit, CMB. The EBO security would allow the issuer to sell pools of EBOs to private investors who would receive an accrual of the scheduled principal and interest payments when the loans resolve through either the borrower reperforming on the loan, or when the loan is foreclosed and goes to claim with FHA, VA, or the Rural Housing Service. MBA’s proposal would provide critical liquidity relief for government servicers by solving for monthly advancing requirements. The approach can be implemented by Ginnie Mae without any need for federal appropriation or additional authority from Congress, relying entirely on the private capital markets to mitigate operational risk. MBA’s policy staff will work with members to refine the proposal and will engage with the current and incoming Ginnie Mae leadership teams to pursue this proposal, as well as other practical opportunities to enhance servicing liquidity.

MBA Responds to HUD's Proposed Flexibilities for Underwriting Rental Income: MBA filed comments last Tuesday regarding the Department of Housing and Urban Development’s (HUD) draft Mortgagee Letter that proposes changes to how rental income is considered in mortgage underwriting. The draft policy would expand FHA-insured mortgage qualification criteria by permitting borrowers to include tenant income in their financial calculations, subject to certain specific requirements.MBA supports the intent of the proposal but urged caution in its comments, recommending the implementation of an automated risk flagging mechanism in the FHA TOTAL Mortgage Scorecard to identify potential financial instability when borrowers rely on multiple income sources. The comments also requested clarifications on several key areas, including borrower reserve requirements, the handling of gaps in boarder income history, and the applicability of the policy to different loan types. This policy change reflects a more flexible approach to mortgage underwriting that recognizes the growing importance of rental income in borrowers' overall financial profiles. MBA will continue to engage with FHA through the Government Loan Production Subcommittee.

FHA Waives Early Payment Default QC Requirements for Recent Disasters: Last Thursday, FHA issued a limited waiver of its Early Payment Default (EPD) review requirements for FHA-insured mortgages in areas affected by Hurricane/Tropical Storm Helene and Hurricane Milton. The waiver applies to loans closed before the disaster's start date that became an EPD between November 1, 2024, and April 30, 2025, recognizing that these early defaults are likely due to unforeseen circumstances like job loss, property damage, or forced relocation. Despite the waiver, mortgagees must continue to provide borrowers with FHA Loss Mitigation options and report delinquencies and meet other servicing requirements. FHA's approach to providing flexibility in mortgage servicing aims to safeguard borrowers from the risk of foreclosure while promoting economic stability in communities rebuilding after natural disasters.MBA will continue to engage with FHA on policies concerning disaster relief.

MBA Leads Housing Coalition Letter to Congress on ROAD to Housing Act: Last Tuesday, MBA led a coalition of 15 housing trade groups in a letter sent to all members of the U.S. House and Senate in support of the Renewing Opportunity in the American Dream to Housing Act (“ROAD to Housing Act,” S. 5027/H.R. 990), authored by Senator Tim Scott (R-SC) and Representative French Hill (R-AR) and recently introduced in the Senate (September) and House (October). Senator Scott and Congressman Hill will chair the Senate Banking, Housing, and Urban Affairs and House Financial Services Committees, respectively, at the start of the 119th Congress in January. The proposed legislation offers reforms to current housing counseling and financial literacy, rental housing assistance, manufactured housing, and construction grant and small dollar lending programs. The legislation would also require annual congressional testimony from the Secretary of HUD and increased congressional oversight of the Federal Housing Administration’s Mutual Mortgage Insurance Fund. The supportive joint letter highlights that the proposal is positioned to serve as a baseline for discussions of any housing program reauthorizations or reforms in both chambers of Congress next year.  The letter also notes the groups’ strong collective belief that both legislative and regulatory reforms are needed to boost housing supply and improve affordability. In a press statement after the bill was introduced in the Senate, MBA President and CEO Bob Broeksmit, CMB, said, “MBA continues to be a fierce proponent for legislative reforms that increase housing supply and affordability. We will work with Senator Scott – and policymakers on both sides of the aisle – to build consensus and promote the enactment of workable solutions like those proposed in this bill.” MBA has been actively engaged with Senator Scott and Congressman Hill (and their fellow committee members on the Senate Banking and House Financial Services panels, respectively) on housing policy matters – and will continue that dialogue during the 119th Congress.

CFPB Director Testifies before Senate Banking Committee: Last Wednesday, the Senate Banking Committee held its last hearing in 2024, titled “Consumer Protection: Protecting Workers’ Money and Fighting for the Dignity of Work.” Director Rohit Chopra of the Consumer Financial Protection Bureau (CFPB) testified on his semi-annual report to Congress. A transcript of the hearing can be found here. While much of the hearing was spent re-litigating the role and structure of the CFPB, Senators discussed rising housing costs, mortgage servicing rules, the use of algorithms in setting rents, and recent CFPB enforcement actions. Senators Tina Smith (D-MN) and Mike Rounds (R-SD) mentioned their bipartisan efforts to expand rural housing and their intent to continue working on housing issues in the new Congress. At the hearing, Chopra indicated he would not resign from his post but would wait to be relieved from his duties by incoming President Trump on January 20, 2025 (or shortly thereafter). The nomination of a new CFPB Director to serve in the Trump administration would result in the likelihood of changes to the agency’s resource allocations and enforcement/rulemaking practices and priorities.

Trigger Leads Bill Dropped from FY 2025 NDAA Conference Report: Despite successful efforts last month by our congressional allies – Senators Jack Reed (D-RI) and Bill Hagerty (R-TN) – in getting the bipartisan, trigger leads Hagerty/Reed amendment included in the “managers’ amendment” to the Senate’s version of a Fiscal Year 2025 National Defense Authorization Act (NDAA), the provision was removed from the NDAA conference report just finalized between the House and Senate due to opposition from outgoing House Financial Services Committee Chair Patrick McHenry (R-NC). The text of that negotiated conference report product (with no trigger leads provision) was formally released on Sunday, December 7. MBA is leading a diverse set of coalition partners to help our congressional allies – lead House sponsors Reps. John Rose (R-TN) and Ritchie Torres (D-NY), along with Senators Reed and Hagerty – advance needed reforms to curb the abusive use of trigger leads while preserving their use in appropriately limited circumstances during a real estate transaction. The Hagerty/Reed amendment mirrored the MBA-supported text of H.R. 7297/S. 3502, the Homebuyers Privacy Protection Act. Congress is expected to vote on the NDAA this week and faces a December 20, 2024, deadline to pass a continuing resolution (CR) to fund the government. In response to the amendment’s exclusion from the NDAA, Senators Reed and Hagerty may attempt to have their trigger leads amendment text included in the evolving version of a CR. The two Senators are also running a “hotline” to seek unanimous consent to pass S. 3502 in the Senate before year’s end – as a means to isolate any opposition and position the bill for the next Congress. MBA will keep working with our allies – including a bipartisan set of 91 House and 43 Senate cosponsors – to explore any remaining options to get this important, bipartisan bill considered in the final days of the current session. If that doesn’t occur, MBA will work aggressively to advance this needed change to mortgage credit trigger leads policy with the 119th Congress. 

MBA Responds to FHFA Suspended Counterparty Program Rule Re-Proposal: On Monday, December 2, MBA submitted a comment letter in response to the Federal Housing Finance Agency’s (FHFA) re-proposal of its Suspended Counterparty Program (SCP) regulation. MBA strongly opposed FHFA’s initial July 2023 proposal that would have significantly expanded the SCP and exposed GSE-approved lenders and servicers to the threat of a draconian penalty – suspension of their seller/servicer status – for minor civil/administrative sanctions or misconduct. In September 2024, FHFA announced a re-proposal of the amendments to its SCP regulation, which MBA commended for addressing the industry’s significant concerns with the original July 2023 proposal. MBA’s letter commends FHFA’s more narrowly tailored proposal and urged FHFA to finalize the rule with one important revision to the definition of “covered misconduct” to further ensure that counterparties are not at risk for routine certifications. MBA suggests that the words “knowingly or recklessly” be inserted before “making false statements or claims.” MBA will continue to monitor any final developments and will keep members informed of any updates. 

MBA Presses HUD MRB on Convenience Fees: On Tuesday, December 3, MBA urged the Department of Housing and Urban Development’s (HUD) Mortgagee Review Board (MRB) to rescind notices of violations (NOV) issued to numerous mortgage servicers that alleged servicers violated HUD policy by improperly charging borrowers convenience fees for expedited payment processing (so called “pay-to-pay” fees).  Specifically, HUD contends that accepting and processing borrowers’ mortgage payments online, over the phone through a customer service representative, or through interactive voice recognition is “part of a prudent mortgagee’s servicing activity” and therefore, charging a fee for such activity is prohibited. MBA strongly disagrees with HUD’s conclusion as the Federal Housing Administration (FHA) has never issued explicit guidance prohibiting convenience fees, despite being well aware of the practice for decades. MBA believes retroactive administrative enforcement is inappropriate and misguided. MBA will monitor and communicate developments to members, including additional policy guidance that may prohibit convenience fees moving forward. 

House Financial Services Committee Holds Hearing on Fintech, Artificial Intelligence: On Wednesday, December 4, the full House Financial Services Committee held a hearing entitled, “Innovation Revolution: How Technology is Shaping the Future of Finance.” Lawmakers on both sides of the aisle expressed strong support for digital asset legislation to establish a federal regulatory regime for that sector, with members calling for the passage of the Financial Innovation and Technology for the 21st Century Act (FIT21) (H.R.4763). A bipartisan assortment of committee members noted their support for incentivizing capital formation and access, but were not unified behind any single piece of legislation. Find the full summary hearing here and a recording here. Artificial intelligence (AI) was another major topic of discussion by the panel, with elected officials exploring the role it will play in the U.S. financial system as well as discussing the possible harms – and boons – greater use of AI may bring. Members further discussed incentivizing investment and liquidity in both public and private markets, and the need to strike a balance between the two. MBA will continue to monitor developments on these issues before the House Financial Services Committee during the 119th Congress.

MBA Releases Report on Artificial Intelligence in the Mortgage Industry: MBA recently published its  Artificial Intelligence in the Mortgage Industry Report, covering the current use of the technology and its regulatory authority in the mortgage industry and the principles for lawmakers ahead of state legislative sessions and the 119th Congress next year. The report provides industry and lawmakers with a foundational understanding of how certain beneficial technologies that have been used for decades could be inappropriately re-defined as AI under recent legislation proposals, including Colorado’s SB 24-205, Consumer Protections for Artificial Intelligence. In recent years, more states have attempted to enact legislation aiming at regulating AI. A majority of these proposals would define technology such as automated underwriting systems and credit scoring models as “AI” and subject to new regulations that could restrict the use and benefits of these important technologies. MBA’s paper highlights that neither system is under the lender or servicer’s control and their use is often required by federal agency guarantors and investors. Additionally, past bills have included opt-outs for consumers, which could require lenders to maintain costly processes to handle significant increases in manual underwriting not seen in the mortgage industry for decades. The white paper also notes the risk of potential consumer harm if these overly expansive definitions of AI are applied to anti-fraud measures.MBA continues to support our state partners in their conversations on AI policy, especially as the Colorado Mortgage Lenders Association aims to amend SB 24-205, and the California Mortgage Bankers Association prepares to comment on the proposed regulations released by the California Consumer Privacy Protection Agency. 

FHA Announces 2025 National Forward and HECM Loan Limits: FHA recently announced updated 2025 loan limits for its Single-Family Title II forward and Home Equity Conversion Mortgages (HECM) programs. Limits for single-unit homes rose to $524,225 in non-high-cost areas, $1,209,750 in high-cost areas, $1,814,625 in special exception areas, and $1,209,750 for HECMs across all areas. FHA updates its annual loan limits using a formula prescribed by the National Housing Act (NHA). The formula considers county or Metropolitan Statistical Area (MSA) home sale data to set limits for different cost categories. The NHA ties FHA's floor and ceiling loan limits to the national conforming loan limit set by FHFA, with adjustments for high-cost and special exception areas such as Alaska and Hawaii to reflect local median prices and construction costs. MBA will continue to engage with FHA on this and other critically important housing policy issues under the Trump administration.