Mortgage Action Alliance - MBA's Grassroots Newsletter
Volume IV | Issue 13 | July 19, 2010
The Dodd-Frank financial regulatory reform bill - more than a year in the works - cleared its final legislature hurdle, passing the Senate 60-39 and handing President Obama a major domestic accomplishment. Once it is signed into law, the 2,300-page bill will set in motion at least 240 rulemaking processes that will fundamentally change the way nearly every segment of the financial services industry is regulated. The President is expected to sign the bill this week. The House, meanwhile, passed a five-year reauthorization of the National Flood Insurance Program by a 329 to 90 vote. The bill now goes to the Senate.
Recent MBA Action:
Regulatory Reform Legislation Clears Final Hurdle, Goes to President for Signature
On Thursday, July 15, 2010, the Senate passed legislation, by a vote of 60-39; that will overhaul our nation's financial regulatory structure. The historic Dodd-Frank Act will make sweeping changes to every segment of our nation's financial services industry, from mortgages to hedge funds to credit rating agencies. MBA worked for over a year to educate lawmakers and staff and fought for a number of issues important to the real estate finance industry. In particular, MBA secured victories throughout the process on risk retention and mortgage reform. The final legislation included the Landrieu-Isakson-Hagan amendment that will exempt qualified residential mortgages from the bill's risk retention requirement and the Crapo amendment that recognizes the unique nature of the CMBS market and provides greater flexibility with regard to the various forms of retained risk. To read MBA's summary of a number of key provisions click here.
The Dodd-Frank Act now goes to President Obama, who is expected to sign the bill in a ceremony this week. MBA is already preparing for the multiple rule making processes that will occur over the coming years.
House Passes MBA - Supported Flood Insurance Reauthorization
Last week, the House of Representatives passed H.R. 5114, the Flood Insurance Reform Priorities Act, by a vote of 329 to 90. The bill, which was introduced by Representative Maxine Waters (D-CA) and Chairman Barney Frank (D-MA), would reauthorize the National Flood Insurance Program (NFIP) through September 30, 2015. The legislation also includes a number of reforms to the program, including: actuarial premium rates phased in for second homes and commercial properties that are currently subsidized; the annual cap on premium rate increases would be raised from 10 percent to 20 percent; coverage limits would be increased to account for inflation and increases in property values, resulting in approximately a 35 percent increase from $250,000 to $335,000 for residential structures (from $100,000 to $135,000 for contents) and from $500,000 to $670,000 for commercial properties; penalties on lenders that fail to enforce the mandatory purchase requirements would be increased; a study of pre-FIRM properties and the feasibility of extending the mandatory purchase requirement to all properties in the 100-year floodplain; and clarification of disclosure responsibilities in the good faith estimate required under RESPA on the availability of flood insurance. The legislation now goes to the Senate, which is expected to pass a shorter extension without the above program changes.
MBA Meets With Treasury and IRS on e-Signature Request for Form 4506-T
On July 15, 2010, MBA met with officials from the IRS and Treasury on MBA's request to the IRS to permit the use of electronic signatures (e-signatures) on IRS Form 4506-T, Request for Transcript of Tax Return, and Form 4506, Request for Copy of Tax Return. Representatives from the IRS and Treasury have already embraced the principle of allowing the use of e-signature for more documents than is currently permitted. They are in the midst of a multiyear technology project on authentication processes, electronic movement of tax return transcripts, and increasing system capacity. Moving towards accepting e-signatures on Forms 4506 and 4506-T is one of the objectives of this project. During the meeting, MBA proposed a short-term solution calling for the IRS to accept a fax of these forms with an e-signature. IRS staff is reviewing the legal issues around this request and will continue to talk with MBA staff about this policy change in the interim while IRS systems are brought up to a place where electronic signature acceptance will be possible electronically.
Mortgage Action Alliance Members Take Action to Support Greater FHA Multifamily Commitment Authority
Last week, members of the Mortgage Action Alliance (MAA), MBA's free grassroots program, swung into action to urge their members of Congress to support Federal Housing Administration (FHA) Commissioner David Stevens' request for an additional $5 billion in commitment authority to keep FHA's multifamily programs going. Last month, Commissioner Stevens notified Congress that that FHA had reached 75 percent of this year's statutory commitment authority for its multifamily programs. This is because the FHA apartment, hospital and health care loan guarantee programs have experienced higher than expected demand during the current credit crunch. Commissioner Stevens added that the current $15 billion limit will be insufficient to meet this higher demand through the end of the fiscal year, and that Congress must provide an additional $5 billion to avoid disruptions to these programs. Unless Congress takes immediate action, FHA will be required to suspend its insurance activity in late August or September. Financing for new construction of apartments and health care facilities is difficult to obtain without FHA insurance, and a reliable FHA program is vital for these sectors. In addition, new production of apartments is critically needed in many markets and shutting down the program for weeks, and possibly longer, could cause these projects to not be built at all. An increase of $5 billion is urgently needed to avoid the potential shut down in the economic activity these projects generate.
To take action, click HERE. If you are not already a MAA member, you will need to first enroll by clicking HERE.
MBA Held Informative "Green" Lending Webinar for Single-Family Members
On July 14, 2010, MBA held a Webinar on Green Lending as a free service for its residential-focused members. Participants learned about home improvement loans for making energy saving improvements, energy efficient mortgages (EEMs), using the Energy Star label with mortgages, home energy ratings and where to obtain more information. The Webinar panelists included a knowledgeable group of experts, namely Robert Sahadi of Green Space Investors, Patricia McBarron of the Federal Housing Administration (FHA), Dave Carey of the Energy Programs Consortium, and Jane King, a lender from Freedom Mortgage. The presentation was designed to inform members of the established mortgage products available and also provide background for members to consider the growing interest by policymakers in Washington, in the states and cities across the country, as well as many consumers, to reduce energy consumption and costs and to use sustainable materials in construction and improvements.
CampusMBA to Host LIVE Online Workshops on Title XIV of the Regulatory Reform Bill
On July 27, 2010, CampusMBA will hold the second of three currently scheduled LIVE Online workshops to provide industry professionals with the information necessary to understand the provisions of the Dodd-Frank regulatory reform bill taking shape in Congress. The second session will address Title XIV, the Mortgage Reform and Anti-Predatory Lending Act, which includes the establishment of a duty of care for originators and loan officer compensation and duty of care provisions, minimum standards underwriting, HOEPA expansion, new appraisal independence standards, as well as remedies and penalties. The third session is planned for August 10th to discuss servicing and secondary market provisions. These 90-minute workshops will give mortgage professionals a glimpse into the future of the industry.
Click here for more information or to register.
Industry Regulatory Developments:
FHA Issues Notice about Seller Concessions, LTV and Credit Score Requirements
On July 15, 2010, the Federal Housing Administration (FHA) published a notice in the Federal Register making adjustments to its underwriting of residential mortgages. The changes are designed to manage the risk to the Mutual Mortgage Insurance Fund, which, as reported late last year, has fallen below its statutory minimum. Specifically, the notice announces that FHA will reduce seller concessions from six percent to three percent of the lesser of the sales price or the appraised value. It also announces that FHA will have set its minimum acceptable credit score at 500 to determine eligibility for FHA financing and reduce the maximum LTV for all borrowers with decision credit scores of less than or equal to 579. Maximum FHA-insured financing (96.5 percent LTV for purchase transactions and 97.75 percent LTV for rate and term refinance transactions) would be available only to borrowers with credit scores at or above 580. All borrowers with decision credit scores between 500 and 579 would be limited to 90 percent LTV. FHA has opened this notice for public comment and MBA will submit comments by the deadline on August 16, 2010.
FHA Multifamily Regulatory Changes
On July 9, 2010, FHA announced plans to implement a series of changes to its multifamily insurance programs, designed to update underwriting policies, increase lender and underwriter quality, and provide more consistent responses from HUD staff. These changes were long advocated by MBA and originally announced at MBA's CREF Convention in February. The policy changes were announced in HUD's most recent Mortgagee Letter 2010-21. As a result of the changes, FHA is putting in place greater oversight of its key counterparties - borrowers and lenders. Lenders will be given greater responsibility for analyzing and monitoring FHA borrowers' performance, a key step in the process of managing the lending risk. The policy changes reflect many best practices seen in today's multifamily market. Future changes will include revisions to the program's application, underwriting guide, and loan documents.
Senators Propose Reforms to Estate Tax
On July 14, 2010, Senators Blanche Lincoln (D-Ark.) and Jon Kyl (R-Ariz.) announced a bipartisan proposal to permanently reform the federal estate tax. The proposal would require the Senate Finance Committee to amend H.R. 5297, the Small Business Lending bill, to permanently set the estate tax rate at 35 percent, with a $5 million exemption phased in over 10 years and indexed for inflation. It would also provide a "stepped up basis" for inherited assets. The Senate is expected to continue its work on the Small Business Lending Bill next week.
Please direct comments or questions to wkooper@mortgagebankers.org.
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