MBAs National Advocacy Conference Residential Issue Briefing June - - PowerPoint PPT Presentation

MBA’s National Advocacy Conference

Residential Issue Briefing

June 20, 2017

Pete Mills, SVP Residential Policy & Member Engagement Steve O’Connor, SVP Public Policy & Industry Relations Meghan Sullivan, AVP Legislative Affairs Brad Cheney, AVP Legislative Affairs Kelley Williams, AVP Legislative Affairs

Opening Thoughts

“In a republican nation, whose citizens are to be led by reason and persuasion and not by force, the art of reasoning becomes of first importance.” ― Thomas Jefferson

Capitol Hill 101 and Advocacy

Washington Environmental Scan

• Policy Landscape: the intersection of ongoing regulatory actions and legislative

needs

• The 115th Congress:
• House Ratio: 238 GOP, 193 Democrat (4 vacancies)
• Senate Ratio: 52 GOP, 46 Democrats, 2 Independents
• Ongoing necessity to connect with, instruct and persuade policymakers

Capitol Hill 101

• The primary committees of jurisdiction dealing with real estate finance issues:
• House Financial Services Committee
• Jeb Hensarling (R-TX) Chairman and Maxine Waters (D-CA) Ranking Member
• Senate Banking Committee
• Michael Crapo (R-ID) Chairman and Sherrod Brown (D-OH) Ranking Member
• Other committees of jurisdiction for our issues include:
• House Ways and Means Committee
• Senate Finance Committee
• House and Senate Appropriations Committees

Introduction to Advocacy

• Advocacy is NOT a once-a-year activity
• The most effective advocate for your business is YOU
• Lobbying is about relationships; it’s critical to develop them now because you’ll never know when you might

need them

• Contrary to public opinion, Members of Congress and their staffs want to build relationships with their

constituents…become their local expert on our issues!

• Ideas for year-round advocacy include:
• Develop a relationship with the staffer for your MoC that handles your issue
• Meet with your MoC or their district staff back home
• Invite your MoC and their staff to visit your office and meet with your team
• As Tip O’Neill said, “All politics are local”

 If you’re so inclined, become politically active with your local MoC

Key National Advocacy Conference Issues

High-Level Overview of Top Issues

• GSE Reform
• Government Lending Program Support
• Regulatory Reform
• SAFE Act Transitional Authority
• Other Miscellaneous Topics

GSE Reform

GSE Reform – State of Play

• Fannie Mae & Freddie Mac in Conservatorship since 2008
• Last piece of “unfinished business” from the financial crisis
• Senate Banking Committee mark-up in May 2014 – last major effort on Hill
• GSEs at zero capital in 2018 – comprehensive & thoughtful reform needed
• FHFA acting now on reform – Congress needs to finish the job
• MBA as thought leader – GSE Reform Plan released in April 2017 (60 pp)

GSE Reform: Why It Is Needed

• Long-term conservatorship is politically and economically unstable
• Reform first: fix structural flaws from pre-crisis system
• Ensure long-term mortgage liquidity and affordable housing support
• Rebalance government and private sector roles in the market

MBA GSE Reform Plan

• Multiple Private Guarantors (GSEs Re-Chartered) w/ utility type returns
• Keep what works…but fix structural flaws in old system
• Explicit backing of MBS vs. implicit backing of GSEs
• Level playing fee for all lenders / No special deals
• Protect taxpayers: strong capital / insur. premiums for MBS backing
• Effective regulation for a fair and competitive marketplace
• Ensure orderly transition to new system – avoid market disruption
• Affordable housing strategy to help renters & aspiring homeowners

Why Congress Needs to Act on GSE Reform

Only Congress can:

• Change the existing charters for Fannie Mae & Freddie Mac
• Establish a new, explicit government guarantee for eligible MBS
• Create a Mortgage Insurance Fund (MIF) funded by premiums
• Empower FHFA (or successor) to grant new charters
• Require FHFA (or successor) to maintain a level playing field
• Provide legitimacy & confidence for a stable, long-term solution

GSE Reform -- What Needs to Happen

• Congress needs to reform GSEs to ensure long-term stability
• New system needs a well-defined govt. backstop for eligible MBS
• Substantial private capital must protect taxpayers
• A structured transition plan is needed to avoid market disruptions
• An affordable housing strategy needs to be part of the solution
• MBA has a plan – let us help.

Government Lending Program Support

• Govt. Lending Programs – State of Play
• FHA, VA, and RHS
• Essential for first-time & LMI borrowers, veterans, and rural markets
• Critical for affordable housing & countercyclical stability
• Adequate resources needed for efficient and sound operations
• Staffing, Technology, & Risk Management
• Technology updates especially important for FHA
• FHA enforcement concerns -- access to credit & program participation

Congress: Support FHA, VA, & RHS programs

• Provide funding for efficient & sound operations
• Technology, Staffing, & Risk Management
• Fund FHA technology via regular appropriations—not w/ lender fees

passed onto consumers

• FHA/HUD needs to improve Defect Taxonomy & Certs
• Lack of clarity & certainty impacts program & access to credit

Government Lending Programs – Key Points

• FHA, VA, & RHS have important & focused public missions
• Key markets/constituents
• Affordable housing support
• Countercyclical support
• Success depends on adequate resources & regulatory clarity
• Public/Private partnerships – MBA wants to help

Regulatory Reform

Regulatory Reform/Relief

• Reg Relief/Reform Discussion is Proceeding on Two Fronts…
• CFPB Reform
• Structural Reforms – Commission, Appropriations, Powers
• “Behavioral” Reforms -- “regulation by enforcement” concerns
• Mortgage Regulatory Reform
• Changes to Substantive Mortgages Rules – QM/ATR, TRID, HMDA…
• …and Moving on Multiple Tracks
• Legislative: Financial CHOICE Act, CLEARR Act
• Executive Order: Treasury EO Report
• Possible new Director?

Financial CHOICE Act – CFPB Reforms

• Passed House on a purely partisan vote on June 8
• Includes CFPB Reforms:
• Changes Bureau into “Consumer Law Enforcement Agency” (CLEA)
• Enforcement only -- No supervision, no exams…
• Eliminates deference to CLEA guidance
• Retains single director
• Subject to appropriations
• Rulemaking reforms: cost-benefit, reg reviews and Congressional “speed bump”
• Enforcement due process reforms for Administrative actions, CIDs

Financial CHOICE Act – Mortgage Regulation Reforms

• Financial CHOICE Act also includes several mortgage rule reforms
• QM Changes:
• Provides QM safe harbor for portfolio loans
• Removes affiliate title fees from 3% cap
• Includes SAFE Act Transitional Licensing provisions included
• BASEL “off-ramp”: but no specific provision on MSR treatment

CLEARR Act

• CLEARR Act – trimmed down regulatory relief bill
• Mortgage Reforms
• QM for portfolio for banks
• Appendix Q fix: allows GSE income/asset documentation and verification standards
• Repeal of punitive Basel III treatment of MSRs
• Amendments to Fair Housing Act and ECOA prohibiting disparate impact claims
• Eliminates “Abusive” from UDAAP
• CFPB Reforms – Raises supervisory limit for depositories to $50 Billion
• Prospects for CHOICE and CLEARR?

MBA Position on CFPB Reform

• Support Bipartisan Commission Structure
• Support Subjecting CFPB to Appropriations Process
• End Regulation by Enforcement With Clear “Rules of the Road”
• Require CFPB to issue rules on UDAAP
• Require CFPB to provide regular written guidance after issuing new

rules; changing prior interpretations

• Strengthen due process reforms on administrative actions, CIDs

MBA Positions on Mortgage Regulatory Reform

• Holistic fixes to QM
• Expand QM safe harbor, make it permanent
• Make Appendix Q more flexible, fix the QM patch for high LTV loans
• Increase threshold for the 3% Points/Fees Cap to $200,000
• Broaden right to cure for DTI for small errors
• Exclude affiliated title from points and fees threshold
• TRID Needs More Clarity
• More written guidance, FAQs to eliminate compliance uncertainty
• Clarify ability to cure and liability issues (make guidance in letter MBA official)
• Delay HMDA rule implementation; address privacy concerns
• Delay/reform Basel III treatment of MSRs
• Align/simplify servicing standards across federal agency programs

Treasury Report from E.O.

• Treasury Report: Aligns with Many MBA positions:
• Addresses “regulation by enforcement” with numerous reforms
• Subjects CFPB to Appropriations
• Recommends more global fixes to QM that apply to all lenders/charters
• More flexibility in LO Comp rule
• Delay implementation of HMDA reporting
• Moratorium on new servicing rules; align servicing rules across regulators
• Report is advisory, not binding, on CFPB
• But may be a road map for a new CFPB Director?

SAFE Act Transitional Authority

SAFE Act Transitional Authority

• The SAFE Act of 2008 created two systems for mortgage loan originators:
• Bank MLOs: Must register with NMLS
• Non-bank MLOs: Must register with NMLS and also be licensed

(testing/education requirements, criminal/financial background checks)

• Difficulties for bank MLOs seeking to change employers:
• State licensing can be slow and burdensome; disincentive for bank LOs to move

to non-bank lenders

• Takes 30/60/90 days or more to complete education and testing, LOs sacrifice

income for weeks or months

• Alternatively, non-bank lenders pay these LOs while they become licensed, even

though they cannot originate or meet with borrowers

SAFE Act Transitional Authority

• MBA’s proposal: 120-day “transitional authority to originate” period:
• Allows non-bank lenders, especially small lenders, to compete for talented MLOs
• Allows MLOs to work for any employer—bank or non-bank—that offers them the best

chance to succeed in their field

• Legislation (H.R. 2121) passed the House last Congress, and was included in the

Senate Regulatory relief package that passed the Banking Committee.

• Possible questions from Capitol Hill
• Will “bad actors” be able to use this process to enter the state licensing system

unchecked? NO!

• Can an “inexperienced” LO take advantage of this transitional authority? NO!
• Who will be responsible for the actions of these transitioning LOs? Sponsoring

Lender.

• Are transitioning LOs subject to the same standards and laws as state-licensed LOs?

YES!

Other Key Industry Issues

Miscellaneous Policy Issues

• Property Assessed Clean Energy (PACE) Financing
• Support S.838 and H.R. 1958, federal legislation to appropriately subject

residential PACE loans to Truth in Lending Act (TILA) consumer protections

• REITs and the Federal Home Loan Bank System
• REITs are an important source of private capital in the mortgage market
• In 2016, FHFA issued a rule rescinding mortgage REITs’ eligibility for FHLB

membership

• MBA strongly supports efforts to reinstate the eligibility of mREIT affiliates

for FHLB membership

Miscellaneous Industry Issues (Continued)

• National Flood Insurance Program Reauthorization
• NFIP is set to expire on September 30th
• Encourage Congress to pass a long-term reauthorization
• MBA also supports S.563 and H.R. 1422, bills that would encourage

development of a private flood insurance market

• Guarantee Fee Non-Housing Prohibition
• In 2011, Congress passed a 10-year g-fee increase to pay for a two month

payroll tax cut

• H.R. 916 would prohibit Congress from counting g-fee increases as sources of

funding for spending that is non-housing related

• Using the housing GSEs as a piggybank to fund unrelated government

programs is bad policy—plain and simple

Questions? Comments? Rebuttals? Accusations?

Logistics

Housekeeping Takeaways for Tomorrow

• Briefing Book and “Leave Behind” Documents as Tools
• Grand Hyatt as base hotel; transportation to Capitol Hill
• Overview of June 21 meetings on Capitol Hill (State Delegation

Meetings)

• Congressional Visit Surveys
• Reception following Hill Meetings at Grand Hyatt
• Mortgage Action Alliance