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 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