Mortgage Action Alliance - MBA's Grassroots Newsletter
Volume IV | Issue 15 | August 2, 2010
As the House raced to adjourn for the month of August, it packed its final week with a series of bills important to the mortgage industry. Last week saw Congress send to the president's desk an emergency spending bill containing an MBA-supported provision to jump-start USDA's rural housing program. The House also passed legislation, at MBA's and MAA's urging, to provide FHA's multifamily programs with enough to commitment authority to keep those programs running for the rest of the fiscal year, as well as a separate bill authorizing the agency's single-family programs to charge higher annual premiums. And it passed the annual HUD appropriations bill, which extends the high-cost loan limits for Fannie Mae, Freddie Mac, and FHA, and contains a needed subsidy for the department's reverse mortgage program. Meanwhile, the House Financial Services Committee held its first markup in many months, approving legislation to establish a regulatory framework for covered bonds and a housing preservation bill.
Recent MBA Action:
MBA Commercial/Multifamily Members Meet with SEC on Regulation AB Proposal
On Tuesday, July 27, 2010, the MBA Commercial/Multifamily Regulation AB Task Force members and senior staff met with the staff at the Securities and Exchange Commission (SEC) responsible for drafting Regulation AB. MBA advocated its position on commercial mortgage-backed securities issues affecting risk retention, reporting schedules and the proposed XML format, timing and transition of the rule's implementation in the marketplace and private placement informational requirements. Regulation AB is a proposed rule governing the offering process, disclosure, and reporting for asset-backed securities. MBA assembled a team of 50 professionals on the commercial side to form a commercial/multifamily Regulation AB Task Force, ably chaired by Keith Dunsmore with Bryan Cave, to provide constructive arguments in favor of MBA's proposed revisions. MBA will be submitting comments that addresses commercial/multifamily and residential issues of the proposed rule in time to meet the August 2 deadline.
Flurry of Activity on FHA Issues as House Races to Adjourn - MBA and MAA Work to Support Industry Priorities on Single and Multifamily Programs
Last week, as the House of Representatives prepared to adjourn for the month of August, representatives took up several pieces of FHA-related legislation. In support of these bills, MBA and the Mortgage Action Alliance (MAA) swung into action to support.
The first bill, passed on Wednesday, July 28, 2010, would increase FHA's commitment authority for its multifamily programs by $5 billion for the remainder of the fiscal year. Without this increase, FHA will exhaust its current authority sometime in mid-August and be forced to stop insuring multifamily loans until October. The legislation became necessary after the Senate late last week failed to include the provision in an emergency spending bill funding the wars in Iraq and Afghanistan. With the congressional recess looming, MBA and the Mortgage Action Alliance (MAA) swung into action. MBA worked with House Financial Committee Chairman Barney Frank (D-MA) to encourage the introduction of H.R. 5872, the General and Special Risk Insurance Funds Availability Act of 2010. To support passage, MBA wrote its own letters of support to congressional leaders and lead industry coalition activity urging swift action. In a call to action, members of MAA also wrote their members of Congress, and in key districts worked with MBA to call their representatives and explain the economic impact if Congress failed to pass the legislation. Focus now turns to the Senate, which must pass the bill this week, before it breaks for August, in order to avoid a shutdown in FHA's multifamily programs for the remainder of the fiscal year. MAA members - particularly multifamily members - are strongly encouraged to write their senators to urge them to pass H.R. 5872, before they break for the August recess by clicking here.
On Thursday, July 29, 2010, the House approved H.R.5850, the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act for Fiscal Year 2011. As mentioned in previous updates, a top MBA priority was included in the legislation: the extension of higher loan limits for FHA, Fannie Mae, and Freddie Mac. These limits for high-cost areas, capped at $729,750 and enacted as part of the 2008 economic stimulus bill, are set to expire on December 31, 2010. The legislation would extend them through September 30, 2011. The HUD appropriations bill also includes a $150 million subsidy for FHA's Home Equity Conversation Mortgage (HECM) program, which is considered to be sufficient to cover the expected re-estimated volume for the next fiscal year.
On Friday, the House of Representatives passed by voice vote H.R. 5981, a bill that will permit the Federal Housing Administration (FHA) to charge higher annual premiums, raising the statutory cap from 0.55 percent to 1.55 percent. The legislation is nearly identical to one of the key provisions of the FHA Reform Act, which passed the House in June but has yet to be considered by the Senate. During debate, Financial Services Committee Chairman Barney Frank (D-MA) stressed that giving FHA the statutory authority to raise annual premiums was a reform that could not wait and that FHA had to have this tool by the start of the new fiscal year. He also made clear that Congress would continue to work to enact the more comprehensive FHA Reform Act, which contains changes to lender enforcement and indemnification, as well as an increase in FHA's multifamily loan limits for elevator buildings. Finally, the chairman agreed to hold an oversight hearing in September with FHA Commissioner David Stevens. MBA sent a letter in support of H.R. 5981 that stated: "Raising premiums is never desirable, but if done prudently, and if coupled with FHA's intention to decrease its upfront premium, this step has the potential to strengthen FHA's books while actually lowering closing costs for many borrowers." During his testimony at a March hearing, Commissioner Stevens stated that with this legislation FHA would raise the annual premium to 85 basis points for loans with LTVs up to and including 95 percent and to 90 basis points for loans above 95 percent. FHA would then lower the upfront mortgage insurance premium from 225 to 100 basis points.
MBA Joins Other Trade Associations in Letter on Interpretive Ruling on RESPA
Last week, MBA joined several other trade associations in a comment to the Department of Housing and Urban Development (HUD) on an interpretative rule applying RESPA's section eight prohibitions to homeowner warranty companies' dealings with real estate brokers. The comment expressed concerns about the interpretation because: of the questions it raises; its interpretation could not be limited; and its analysis concerning the distinction between permissible compensation for actual services and illegal referral fees was new. For these reasons, the comment asked that HUD establish these rules through a full rulemaking.
House Committee Approves Covered Bonds, Housing Preservation, Medical Debt Bills
On Tuesday and Wednesday of last week, the House Financial Services Committee approved a slate of bills, three of which MBA addressed in a letter to the committee. MBA supported a bill sponsored by Rep. Scott Garrett (R-NJ) that would establish a statutory framework for the covered bonds market. During the mark-up, the committee accepted an amendment by Rep. Melissa Bean (D-IL) that would establish a consortium of federal regulators to make rules governing covered bonds. Specifically, the OCC, FDIC, Federal Reserve Board and Securities and Exchange Commission would have authority to do joint rule makings. The bill is not expected to pass the House this year, and is more likely to be considered during the next Congress as part of a more comprehensive bill addressing the future of Fannie Mae and Freddie Mac.
The Financial Services Committee also approved H.R. 4868, the Housing Preservation and Tenant Protection Act. The comprehensive bill, introduced by Chairman Barney Frank (DMA), is intended to stem the loss of affordable rental housing units across the country. MBA members have been involved over the year-long drafting process in providing comments on the bill's provisions. In its letter, MBA highlighted a pair of issues that continue to require refinement: a section that grants the HUD Secretary the right to purchase any housing covered under eligible federal housing programs; and a section that allows Ginnie Mae to securitize loans insured pursuant to state Housing Finance Association risk-sharing programs.
Finally, the committee approved H.R. 3421, the Medical Debt Relief Act. This bill requires that medical debt that was in collection, but has been fully paid or settled, be excluded from consumer credit reports for certain purposes. In its letter MBA noted that, "Exclusion of fully paid or settled medical debt from credit reports will work to improve borrowers' credit and reduce their costs of housing."
MBA Joins Groups in Urging Senate to Pass FHA Reform Act
On Wednesday, July 28, 2010, MBA joined ten other groups in urging Senate leaders to quickly pass H.R. 5072, the FHA Reform Act. The letter noted that the bipartisan legislation cleared the House last month by an overwhelming vote of 406 to 4. H.R. 5072 would raise the cap of FHA's annual insurance premium to 1.55 percent from 0.55 percent, create a permanent position of Deputy Assistant Secretary for Risk Management and Regulatory Affairs at FHA, apply indemnification provisions to all Direct Endorsement (DE) lenders, and permit FHA to suspend a lender nationwide on the basis of the performance of one of its regional branches. The legislation also includes a key MBA-supported provision to raise FHA's multifamily loan limits for elevator buildings.
CampusMBA to Host LIVE Online Workshops on Servicing and Secondary Market Issues of the Regulatory Reform Bill
On Tuesday, August 10, 2010, CampusMBA will hold the third in our series of 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. This webinar will include a discussion of the bill's new servicing provisions, including mandatory escrows, lender-placed insurance notices and requirements, payment crediting standards, time lines for producing pay-off statements, changes to Qualified Written Requests, and new penalties that could affect servicers. In addition, you will learn about the bill's significant new data collection and publication requirements regarding loan performance and the Making Home Affordable program, as well as federal grant programs to help pay homeowners' mortgages and to fund legal aid to prevent foreclosures and evictions.
Secondary and capital markets topics include the bill's credit risk retention requirements and credit rating agency provisions. The fourth session is tentatively scheduled for September 8, 2010, at 2:00pm EST to discuss the powers of the new bureau. These 90-minute workshops give mortgage professionals a glimpse into the future of the industry.
Click here for more information or to register, or contact Faith Cooper fcooper@mortgagebankers.org (202) 557-2873.
Industry Regulatory Developments:
SEC Opens and Expands Comment Period on Regulatory Reform Provisions
Last week, the Securities and Exchange Commission (SEC) announced that it is accepting public comments on the various statutory requirements that it will be initiating several rulemaking procedures for under the Dodd-Frank Regulatory Reform Law. This is an opportunity for interested parties to weigh-in early and unofficially on the myriad issues that the SEC will be regulating in the near future. These issues include, but are not limited to, the liquidation of broker-dealers, regulation of hedge funds, regulation over savings and holding companies, and regulation over securities under the new Wall Street Transparency and Accountability Act. Official comment periods will be announced in the coming months through the Federal Register.
House Financial Services Committee Examines Commercial Real Estate Legislation
On Thursday, July 29, 2010, the House Financial Services Committee held a hearing to discuss legislation that would promote liquidity in the commercial real estate markets. The hearing was called to examine H.R. 5816, the Commercial Real Estate Stabilization Act of 2008 (CRESA), which was recently introduced by Rep. Walt Minnick (D-ID). The legislation would direct the U.S. Department of the Treasury to guarantee bonds that are backed by pools of small-balance commercial loans and real estate owned properties for small, midsized, and large financial institutions with a minimum of fifty percent of the guarantees going to assist small community banks. The hearing focused on the possible impact that CRESA could have on aiding these community banks with troubled commercial debt and to helping restore the commercial mortgage-backed securities (CMBS) market. A number of Representatives and several of the witnesses emphasized that regulatory and accounting changes coupled with overall economic uncertainty continue to the main reasons for a slow recovery.
Senate Stalls on Small Business Jobs Bill/Estate Tax Proposal
Last week, the Senate failed to move forward with the latest substitute to H.R. 5297, the Small Business Jobs Act of 2010. Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY) were unable to reach agreement on amendments that the Republicans were seeking votes. Included in these amendments, is a bipartisan proposal by Senators Blanche Lincoln (D-Ark.) and Jon Kyl (R-Ariz.) to permanently reform the federal estate tax. The proposal would permanently set the estate tax rate at 35 percent, with a $5 million exemption phased in over 10 years and indexed for inflation. It remains unclear on when the Small Business Jobs Act will return to the Senate floor, but MBA will continue to work with members of Congress on the importance of addressing the estate tax before the end of the year.
Federal Banking Regulators Issue Final Rule on Loan Officer Registration
On Wednesday, July 28, 2010, the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board (FRB), the Federal Deposit Insurance Corporation (FDIC), Office of Thrift Supervision (OTS), the Farm Credit Administration (FCA), and the National Credit Union Administration (NCUA) jointly published a final rule in the Federal Register to implement the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act). The rule covers employees of banks, savings associations, credit unions or Farm Credit System (FCS) institution and certain of their subsidiaries who serve as residential mortgage loan originators. This final rule lays out the requirements for the institutions to require residential mortgage loan originators to register with the Nationwide Mortgage Licensing System and Registry (NMLSR), obtain a unique identifier and adopt and follow written policies and procedures to assure compliance. The final rule will be effective on October 1, 2010 and compliance with the registration requirements will be required within 180-days of the agencies named earlier publish a notice for initial registration in the Federal Register.
New Jersey and South Carolina Extend Licensure Deadline
Last week, New Jersey and South Carolina extended their deadlines for processing license applications as they transition to the National Mortgage Licensing System (NMLS). Details of the extensions are below; however, it is important to note that the application filing deadlines remain the same in both states. The extensions merely apply to lenders' and originators' ability to operate and originate new business while the states process applications. South Carolina will post information to their website shortly, but the State will allow companies and originators to operate until October 1, 2010. This will apply most importantly to companies and their originators that have submitted applications and payment in the first tier by April 30, 2010, and the second tier by July 30, 2010. This extension is the same as the state test extension and will require that all items required for licensure be submitted and reviewed by the Bureau of Financial Institutions prior to October 1, 2010. Ability to operate without a license in the "approved conditional" or "approved deficient" category will not be allowed after October 1, 2010. Applications that are received by the department after July 30, 2010, will be reviewed after all other application tiers. They will not be allowed to operate and are not covered by this extension. New Jersey issued an administrative order providing for a 90-day extension of time for the processing of filed applications for the transition of a license to their SAFE Act compliant licensing system under the new NJ Residential Mortgage Lending Act. This Order pushes the processing completion date for filers back from July 31, 2010 to October 31, 2010, with an interior file-by date to cure all application deficiencies of September 30, 2010. All persons and entities falling into the "filer" class receive the benefit of an extension of authority to operate and transact new business for the 90-day period. All persons and entities licensed or registered under NJ's "old" law (the NJ Licensed Lenders Act) who fail to file a transition application by 11:59 pm on July 31, 2010 will lose authority to operate in NJ as of midnight on July 31st. Similarly, all filers who get the benefit of the extension, but who fail to cure all deficiencies before 11:59 pm on September 30, 2010, risk losing all authority to operate in NJ at midnight on October 31, 2010.
Massachusetts Passes Omnibus Mortgage Bill Which Now Awaits Governor's Signature
Last week, the Massachusetts legislature passed a bill, the Act to Stabilize Neighborhoods, which is a comprehensive mortgage lending bill with provisions relating to reverse mortgage, tenant notification, mortgage fraud, foreclosure mediation and the right to cure. The bill, which now awaits the Governor's signature, contains several improvements from the original version in the areas of vacant property registration and various time frames for notification and mediation. The time frame for which a tenant of a foreclosed property must cure a violation was reduced from 60 days to 30 days. The time frame in which a borrower can opt-in to loan modification negotiations was shortened from 60 days to 30 days. The vacant property pilot program, which would have authorized cities or town to adopt vacant property registration programs, was completely removed from the bill.
Please direct comments or questions to wkooper@mortgagebankers.org.
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