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 115 th 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; i t’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
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