CMB Oral Examination
Brookings Paper Duty to Serve
(FNMA/FHLMC) - Serving the under served (GNMA) Model. GNMA takes all the risk.
CFPB 2.0 Advancing Consumer Protection Supervision
Examination should expect Compliance - Not Perfection. Examinations and priorities should be reflective of an institutions risk. Appeal of supervisory findings should be public.
2018 Community Home Lenders Association (CHLA) Report on IMBs
IMB's are important for a number of reasons. 1) IMB's are the true small businesses in the mortgage market; 2) IMB's are heavily regulated, yet they are not backed by taxpayers - unlike banks (whose deposits are FDIC insured) or investment firms (whose clients' accounts are SIPC insured) 3) Since the 2008 housing crisis, IMB's have significantly increased their market share of mortgage lending, as many banks exited the market or imposed credit overlays; and 4) IMB's - particularly small and mid-sized lenders - provide more personalized service (both in mortgage origination and servicing) than the large, national banks and other national lenders.
2018 Community Home Lenders Association (CHLA) Report on IMBs MBA's CEO, Bob Broeksmit's comments from report
IMBs have always served the needs of a wide variety of consumers, particularly low and moderate income families and first time homebuyers. Their historic and current contribution to the mortgage market reinforces their importance to making the American dream of homeownership a reality. "It is the responsibility of all stakeholders, including regulators, to protect consumers by supporting rules and regulations that support IMBs. MBA believes the recommendations put forth in this white paper will enhance market stability and strengthen the housing finance system to better serve consumers."
2018 Community Home Lenders Association (CHLA) Report on IMBs MBA White Paper on the importance of IMBs
IMBs have played a vital role in both our past and present housing finance systems. Over the past decade, IMBs have become the primary source of mortgage credit for the most critical sectors of the housing market - first time home buyers, working families and minority households. Post crisis regulatory regime for IMBs has become quite robust. As policymakers assess the state of the housing finance system, they should avoid steps designed to "force" market share away from IMBs.
Brookings Paper
In 2019 Non Banks originate: - more than 75% of all FHA and VA - 50% of FNMA/FHLMC mortgages In 2007 - Non Banks were 20% ish In 2019 Non Banks originated more than half of all mortgages
Technology Resource Center Cybersecurity
See Selim Aissi Housing Wire interview regarding protecting endpoints and securing agains Cyberattacks. https://www.housingwire.com/articles/qa-ellie-maes-selim-aissi-on-how-to-prevent-phishing-and-ransomware-attacks-when-working-remotely/?utm_campaign=Newsletter%20-%20HousingWire%20Daily&utm_source=hs_email&utm_medium=email&utm_content=85147899&_hsenc=p2ANqtz--l2cB-mUxrKtV6GOKA4JA8ccQcWyH0GfWYJaH8BysmmK8g01G8_Cbe2QGPQ8uq7L2pdCrfcG3S6oGfmeLYW5gbH-A92w&_hsmi=85147899
What is meant by the bright LINE
Separation between the primary and secondary mortgage mortgage
2018 Community Home Lenders Association (CHLA) Report on IMBs Summary
The Community Home Lenders Association is the national voice for small and mid-sized IMB's - and the only national association that exclusively represents non-bank mortgage bankers. REGULATORY RELIEF FOR IMBs 1) IMB's are highly regulated - subject to supervision and enforcement by every state in which they do business, supervision by the CFPB and stringent SAFE requirements. The CFPB should give smaller IMBs an opportunity to correct compliance problems before imposing fines or enforcement action. Bank and CU Originators should pass the SAFE Act test, have background checks and complete 8 hours of CE. FEDERAL HOUSING ADMINISTRATION 1) Reduce Annual Premiums from .85 to .55 2) End Life of Loan Premium FNMA/FHLMC: GSE Reform - FHFA should continue their progress 1) Develop Recapitalization Plans 2) Complete GSE Capital Requirements 3) Suspend the increased capital buffer 4) Prohibit G Fee volume discounts and operating Risk Sharing and treat all lenders equally
CFPB 2.0 Advancing Consumer Protection Market Monitoring
Withdraw the public facing complaint database
MBA Coronavirus (COVID-19) FHA Temporary Waiver of QC Requirements for Early Payment Defaults and Field Reviews of Appraisals; COVID-19 Impact on Compare Ratios
• June 22, 2020 FHA INFO #20-44 o As a result of the COVID-19 National Emergency, FHA has observed a significant increase in EPDs nationwide. Most are likely caused by loss of employment and/or income due to the public health emergency, and not the result of non-compliance with FHA Single Family origination and underwriting requirements. o COVID-19 related EPD increases are affecting Compare Ratios (Neighborhood Watch) While FHA is unable to remove any loans in default or claim status from Neighborhood Watch Compare Ratio calculations, including loans in forbearance for borrowers affected by the COVID-19 National Emergency, FHA will consider the impact of the COVID-19 National Emergency as a relevant mitigating factor when a mortgagee's Compare Ratio is above the designated threshold. - As a result of social-distancing, shelter-in-place, circumstances, mortgagees may be unable to conduct targeted field reviews of appraisals on 10 percent of FHA-insured mortgages selected for the monthly post-closing QC sample. FHA is providing mortgagees with flexibility by temporarily waiving part of its requirements found in SF Handbook, Section V.A.3.c.ii(C)(1)(b). This temporary partial waiver applies to QC reviews currently in process and for cases selected as part of a mortgagee's May, June, or July 2020 QC selections. CFPB CARES Act Mortgage Forbearance consumer site: https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/ Federal law passed on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, puts in place protections for homeowners with mortgages that are federally or Government Sponsored Enterprise (GSE) backed or funded (FHA, VA, USDA, Fannie Mae, Freddie Mac). California State: March 16, 2020, Gov. Gavin Newsom Executive Order N-28-20, Dept of Business Oversight- executive order requested financial institutions to implement an immediate moratorium on foreclosures arising from causes related to COVID-19.
MBA Coronavirus (COVID-19) Appraisals and ReVerification of Employment
• Provides waterfall following traditional guidelines that were subject to COVID-19 related obstacles: Appraisals -Most agencies allowed for Exterior and Desktop reviews on Primary Residence. 1. e.g. VA requiring interior inspection on new construction if no shelter in place order in effect (effective until 4/1/2020) 2. On April 14, federal banking agencies (Fed Reserve, OCC, FDIC) amended rule allowing deferment of new appraisals up to 120-Days post-closing; effective for transaction closed on or before 12/31/2020. (some exclusions are transactions for acquisition, development, or constructions- largely applying to commercial properties.)
what is the MBA's view on CFPB 2.0?
*#* A new CFPB - CFPB 2.0 - can fulfill its consumer protection mission by producing rules and guidance that prevent consumer harm rather than merely punishing harm after it occurs. Such a shift in emphasis recognizes the strides the Bureau and industry have made over the past six years in creating an environment where supervision and guidance are actively sought by industry to ensure compliance. *The bureau should:* *#* Place priority on issuing appropriate guidance to facilitate compliance with federal law. Establish guidelines for when and how it will issue and revise rules and guidance. *#* Acknowledge that it is bound by its guidance. Ensure industry input on mortgage and other issues. *#* Provide timely answers to questions on regulations with authoritative guidance. Publish notice of changes in guidance and apply those changes prospectively. Provide time for regulated entities to comply. Ensure due process in its enforcement actions.
What are IMB (independent mortgage bankers important to our industry?
*#* Independent mortgage bankers are non-depository institutions and typically borrow from various warehouse lenders to finance loans prior to their sale in the secondary market. *#* Most IMBs are privately held companies, owned and operated by a single individual or small number of owners whose personal net worth is fully invested in the company. If the company fails, the owner may be financially wiped out, providing substantial "skin in the game" and strong incentives to manage the business for the long term. *REGULATORY FRAMEWORK AND OVERSIGHT* *#* Independent mortgage banks are subject to state supervision in every state they do business, and they are also regulated at the federal level, where the Consumer Financial Protection Bureau (CFPB) has supervisory, investigative and enforcement authority over them. *#* Each year, the typical IMB will have numerous financial solvency reviews from state and federal regulatory agencies. *#* Independent mortgage banks are the only mortgage lending business model where all individual loan originators employed by the company are required to be licensed in each state in which they operate. *#* To become licensed, every IMB loan officer must take verified pre-licensing education courses, pass a licensing exam and complete mandatory continuing education each year to maintain their license. *#* Licensed IMB loan officers must also undergo an FBI criminal background check and a review of their financial background by the state regulator in each state in which they are licensed.
What's going on with CFPB Servicing Regulation
*#* One of the Consumer Financial Protection Bureau's (CFPB's) first major actions under the Dodd-Frank Act was to write and implement nationwide mortgage servicing standards. In addition to promulgating and updating these regulations, the CFPB is also responsible for examining mortgage lenders for compliance with these servicing rules and other laws and regulations pertaining to consumer financial services. *Overview* *#* In January 2014, the CFPB implemented its Dodd-Frank mandate to regulate mortgage servicing by enacting a comprehensive rule that covers all parts of the mortgage servicing process and related consumer experience. Since then, the CFPB has published several amendments, most recently in August 2016. *#* These rules have extensive provisions governing loss mitigation requirements when a consumer is unable to make payments, as well as requirements around responding to potential successors in interest and responding to requests for information. *#* The CFPB also has the power to define who is a debt collector and is required to give the "mini-Miranda" warnings under the Fair Debt Collection Practices Act (FDCPA). *MBA's Position / Next Steps* *#* MBA and its members believe every consumer is entitled to quality customer service, timely communication, and a fair hearing if they fall behind on their mortgage payments. *#* MBA will assist its members in understanding and implementing the requirements and will continue to work with the CFPB to gain clarity in areas where these rules are unclear, vague, or do not reflect actual market practice. *#* The CFPB's supervision activities should take into account possible parallel state investigations and provide more timely feedback to servicers when examinations have concluded
SAFE ACT: Implementation of MLO Transitional Authority
*#* The *Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (S. 2155)* amended the federal *Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act* of 2008 to provide for a 120-day temporary transitional authority period for a bank mortgage loan originator (MLO) moving to a non-bank lender, or for MLOs already working for a non-bank lender seeking licensure in another state. *#* The law mandates that states implement transitional authority by November 24, 2019. However, many states have already taken action and could be ready much sooner. The Bureau of Consumer Financial Protection (BCFP) should issue expedited written guidance to make clear that while all states must implement transitional authority in 18 months, states may implement the law sooner if they choose to do so. *Overview:* *#*Since 2008, the SAFE Act required MLOs employed by non-bank lenders to be licensed, which includes pre-licensing and annual continuing education requirements, passage of a comprehensive test, and criminal and financial background reviews conducted by state regulators. *#* These MLOs are also registered in the Nationwide Mortgage Licensing System and Registry (NMLS). By contrast, MLOs employed by federally insured depositories or their affiliates only have to be registered in the NMLS - they do not have to pass a test or meet standardized pre- and post-licensing education requirements. *#* To mitigate these challenges faced by MLOs and their employers, several states have taken action - either independently or through collaborative efforts facilitated by the National Mortgage Licensing System (NMLS) and the Conference of State Bank Supervisors (CSBS): *Impact:* *#* State licensing of MLOs can be a slow and burdensome process, which creates a disincentive for MLOs already employed at bank and bank affiliated lenders from moving to non-bank lenders. Under the current process, an MLO making the move from bank to non-bank is required to sacrifice their income for several weeks or months. Alternatively, the lender is required to pay the MLO even though the MLO cannot originate loans or meet with prospective borrowers or referral sources. Neither option is tenable or appropriate for a competitive or mobile labor market. *MBA's Position / Next Steps:* *#* The BCFP should consult with the CSBS and others to discuss transitional authority implementation and the NMLS system. *#* BCFP should rescind Bulletin 2012-05 and issue expedited written guidance that: *i)*Notes that federal law has been amended and now explicitly permits all federal MLO transitions for a period of 120 days; *ii)* Clarifies that all states must implement the law in 18 months; and, *iii)* Offers a clear path for states to adopt transitional authority sooner than 18 months if they able to do so.
Basel III Treatment of Mortgage Servicing Assets
*#* The punitive treatment of mortgage servicing rights (MSRs) under the Basel III risk-based capital standards threatens to undermine the value of this important asset, with adverse implications for the entire mortgage finance chain. *#* Performance, capacity and service should be the primary drivers of who gets market share in servicing, not excessively high capital standards on one segment of the industry. *Overview* *#* The Basel III bank capital rule currently being phased-in increases the risk-weighting of MSRs held by banks from 100 percent to 250 percent. *#* It also decreases the cap on MSRs a bank may hold on its balance sheet to an unduly stringent 10 percent limit; MSR assets above the limit must be deducted dollar-for-dollar from regulatory capital. *#* In addition, MSRs, deferred tax assets and equity interests in unconsolidated financial entities are limited-in aggregate-to a 15 percent common equity component of tier one capital, above which they must be deducted from regulatory capital *MBA's Position / Next Steps* *#* MBA has engaged with the Trump administration to increase their awareness of the issues created by Basel III and its disproportionate impact on an asset that is unique to the American mortgage system. *#* MBA has urged the administration to revise the treatment of MSRs as part of its ongoing regulatory review under the Executive Order on Core Principles for Financial Regulation and appreciates the attention to this issue in the Treasury's recent report on reducing regulatory burden. *#* MBA appreciates both the implementation pause and focus on changing the Basel III MSR treatment. MBA submitted comments in favor of the implementation pause and will be commenting on the proposed simplification.
What is NFIP re-authorization? National Flood Insurance Program
*#* floods are the number one disaster in the United States in terms of lives lost and property damaged. *#* The National Flood Insurance Program (NFIP) provides over 5 million property owners with insurance to protect their homes and businesses from losses due to flooding, and serves as an integral component of recovery for communities across the country after major flooding events. The current NFIP reauthorization expires on September 30, 2017-at the height of hurricane season. MBA urges Congress to move swiftly to reauthorize the NFIP. *Overview* *#*The NFIP was established in 1968 and plays a key role in our nation's efforts to prevent and recover from flood disasters. *#*Flood insurance is mandatory for any property located in a high risk area with a mortgage from a federally-backed or -regulated lender. For the past 40 years, the NFIP has served as the primary provider of flood insurance for homeowners. While the private flood insurance market has played a strong role in the large commercial and multifamily sectors, it is just beginning to grow in the residential sector. *MBA's Position / Next Steps* *#* Long-term reauthorization: Development of private flood insurance market: Exemption for large commercial transactions: Provide clear, comprehensive and updated guidance to industry:
FHA Quality Assurance Framework
*FHA Quality Assurance Framework* *#* MBA supports the Federal Housing Administration's (FHA's) development of a quality assurance framework that reduces regulatory uncertainty, provides clarity to lenders, and promotes access to affordable mortgage credit. *Overview* *#* In June 2015, the Department of Housing and Urban Development (HUD) released its final Single Family Housing Loan Quality Assessment Methodology (Defect Taxonomy). *#* The Defect Taxonomy is FHA's plan to increase the efficacy of its own Quality Assurance efforts; it addresses FHA's strategy to identify and capture information about defects and severities revealed through an individual loan-level review. *#* The final Taxonomy failed to address the concerns MBA raised when commenting on the language proposed in October 2014-the Defect Taxonomy provides for different tiers of defects, but still does not assign any specific remedies to address them. *#* In January 2017, FHA announced the implementation of the Loan Review System (LRS) that operationalized the final Defect Taxonomy on May 15, 2017. While MBA applauds FHA's implementation of the LRS, lenders still support including remedies with the tiers to provide clarity and certainty when originating FHA loans. MBA also urges FHA to continue discussions with lenders and industry stakeholders as lenders are now using the LRS within their companies. *MBA's Position / Next Steps* *#* Creating well-defined standards and expectations for lenders is critical to expanding access to credit. MBA believes that a clear and fair quality assurance program will provide the transparency and consistency lenders need to do business with FHA and provide affordable mortgage credit to low-to-moderate and first-time homebuyers. *#* MBA will continue to advocate for the LRS to include a Defect Taxonomy that assigns specific-and appropriately proportioned-remedies to each defect tier. Without the precise identification of potential indemnifiable defects to ensure that lenders have clear expectations of the consequences associated with certain defects, the Taxonomy will not have a meaningful impact on increasing access to credit.
Why is language access important to our industry and the MBA in general? What is mean by limited english proficiency?
*Language Access* *#* Serving the needs of Limited English Proficiency (LEP) consumers is a growing priority for key mortgage industry regulators-including the Consumer Financial Protection Bureau (CFPB), the Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA). At the same time, lenders and servicers aspire to reach and effectively provide their services to the widest array of borrowers. *#* However, providing comprehensive foreign language services to LEP consumers presents legal and operational challenges. *#* MBA is facilitating dialog with consumer advocacy groups and actively engaging with regulators to ensure that any requirements in this area are well conceived and workable. *Overview* *#* LEP individuals are those who do not speak English as their primary language or have a limited ability to read, speak, write or understand English. The definition also includes individuals with sensory impairments, who are deaf or hard of hearing, or are blind or have visual impairments. *#* Census data shows that nearly 9 percent of the United States population has limited English proficiency. Approximately 16,350,000 (or 65 percent) of these individuals speak Spanish, while 1,660,000 (7 percent) speak Chinese, 850,000 (3 percent) speak Vietnamese, 620,000 (2 percent) speak Korean, and 530,000 (2 percent) speak Tagalog. Housing decisions that are based on LEP may have a greater impact on these and other groups because of their nationality. *MBA's Position / Next Steps* *#* MBA will engage members to determine what resources are currently useful and identify legal, policy and operational questions related to language access in both loan origination and servicing. *#* MBA will continue an ongoing dialogue with regulators and other stakeholders to better understand their emerging goals and priorities-and work on solutions.
What had changed with FHA Certification?
*Loan-Level Certification:* *#* The final loan-level certification reflects key MBA recommendations to safeguard lenders from liability for minor mistakes that would expose them to undue False Claims Act risk. *#*The revised form only requires a mortgagee's employee to attest to the fact that they have validated the information provided to them by certifying the information in the application is "to the best of the lender/mortgagee's knowledge...complete and accurately represents the information obtained by the lender/mortgagee as of the date ... provided." By comparison, the stricter standard in the old certification required all of the information in the application to be "true" and did not explicitly limit exposure for post-verification changes in the information. *#* Most notably, the revised form also establishes an insurability standard, requiring that lenders now certify there is "no defect that should have changed the processing or documentation" such that "the mortgage should not have been approved in accordance with FHA requirements." Therefore, lenders will only be liable for mistakes that would have altered the decision to approve the loan. *#* By determining loan defects through terms of insurability, FHA's intent is to provide greater certainty and clarity regarding the types of errors that can expose lenders to False Claims Act risk. The new standard will be controlling for HUD in its reviews and in any referrals to the Department of Justice (DOJ). *#* However, the DOJ continues to rely on its own standards for False Claims Act enforcement. Following the publication of the final loan-level certification, the DOJ posted a notice on its website affirming its intention to pursue claims under the False Claim Act. This implies that litigation risk will continue to increase the cost of FHA lending. *Other changes include:* *i.*The elimination of lender liability for third party actions, except on Page Three under the loan-level underwriting certification. *ii.* The removal of the Mortgagee certification provision regarding fraud and knowledge of criminal and civil offenses. A revised and expanded version of this certification was moved to the proposed revisions to FHA's lender-level certification due to its institutional level scope. *iii.*The revision of all language to be consistent with the policies of the Single Family Handbook, and to remove references to Handbooks no longer in use by Single Family Housing. *iv.* The new loan-level certification became effective August 1, 2016. Lenders will now sign the form when they annually re-certify at the close of the Fiscal Year. *MBA's Position / Next Steps:* *#*MBA strongly supports the elimination of the pre-endorsement requirement in Section (h) on Page Four of the final loan-level certification that would hold lenders accountable for minor defects, even those that are curable and do not impact the loan's insurability or severity of loss to FHA. Since Section (h) is still included in the final loan-level certification, MBA urges HUD to issue a technical correction on Page Four of the loan-level certification in Section (h) to read: *#*The Mortgagee has exercised due diligence in processing this mortgage in reviewing the file documents listed at HUD Handbook 4000.1, II.A.7.b. and the documents contain no defect that should have changed the processing or documentation such that the mortgage should not have been approved in accordance with FHA requirements. *#*MBA firmly supports HUD's intent to only hold lenders liable for mistakes that would have altered the decision to approve the loan and appreciates FHA's publication of an FAQ to provide further clarity regarding the standard for certification in Section (h). However, MBA continues to believe that an official clarification of HUD's original intent is vital to the future use and interpretation of this legal certification. *#*MBA also supports the additional revisions to the loan-level certification but maintains that Page Three of the form should reflect the same knowledge qualifiers that are reflected on Page One and Four of the certification form that require certification "to the best of" a signer's knowledge. This clarification will provide consistency so that lenders can sign this important document with confidence.
Federal Housing Programs Need Funding for Technology and Risk Management Improvements
*Over View* *#* The importance of the federal housing finance programs for low-to-moderate income families has grown in the years since the recession. To keep pace with changing program needs, more funding is needed to ensure that the Federal Housing Administration (FHA), Department of Veterans Affairs (VA), Department of Agriculture's (USDA's) Rural Housing Service and Ginnie Mae have the necessary technology, systems and human capital to run these programs in a financially sound manner. *Impact:* *#* The systems, technology and staff at these federal agencies are stretched too thin to efficiently and effectively manage their expanded programs. *#* Managing these guarantees with outdated systems and insufficient staff degrades the service levels and puts taxpayers at potential risk. *#* In the absence of sufficient and stable funding, some agencies have proposed charging administrative fees to lenders. These fees would be passed along to consumers, raising the cost of mortgage credit *MBA's Position / Next Steps:* *#* MBA strongly supports providing FHA, USDA, VA and Ginnie Mae with the resources for the staffing and systems upgrades they need to operate effectively. *#* In 2015, Ginnie Mae MBS-into which nearly all FHA, VA, and Rural Housing Service loans are sold-provided liquidity for 1.9 million home mortgage transactions. *#* By these metrics, these programs are perhaps the most successful federal programs serving low-to-moderate income and minority families by helping them buy homes, build wealth and strengthen neighborhoods and communities. *#* It is critical to ensure that these programs are allocated sufficient resources through the appropriations process, to ensure they are managed effectively and efficiently with minimal risk to the taxpayer. *#* Funding these enhancements with fees on lenders would set a dangerous precedent of shifting operations funding for federal housing programs, and raising costs for the borrowers they are designed to serve.
Tell me a bit a the National Servicing Rules.
*Overview* *#* In January 2014, the CFPB implemented its Dodd-Frank mandate to regulate mortgage servicing by enacting a comprehensive rule that covers all parts of the mortgage servicing process and related consumer experience. Since then, the CFPB has published several amendments, most recently in August 2016. *#*These rules have extensive provisions governing loss mitigation requirements when a consumer is unable to make payments, as well as requirements around responding to potential successors in interest and responding to requests for information. *#*The CFPB also has the power to define who is a debt collector and is required to give the "mini-Miranda" warnings under the Fair Debt Collection Practices Act (FDCPA). *#*Additionally, the CFPB has supervision and enforcement powers over mortgage servicers and can monitor for compliance with its servicing rules and other federal regulations. This authority includes the power to determine what is-and sanction for-unfair, deceptive or abusive acts or practices (UDAAP). *MBA's Position / Next Steps:* *#* MBA and its members believe every consumer is entitled to quality customer service, timely communication, and a fair hearing if they fall behind on their mortgage payments. *#* MBA will assist its members in understanding and implementing the requirements and will continue to work with the CFPB to gain clarity in areas where these rules are unclear, vague, or do not reflect actual market practice. *#* The CFPB's supervision activities should take into account possible parallel state investigations and provide more timely feedback to servicers when examinations have concluded. *#* The CFPB should clearly define what practices it believes fall under UDAAP and give the industry advance notice of its determinations, rather than defining these provisions through enforcement actions
What is a super lien?
*Overview* *#* As a core principle, private liens recorded after origination of a first lien mortgage/deed of trust (mortgage) should not be able to move ahead of the first position mortgagee in foreclosure priority, nor be able to extinguish the mortgage when that private lien is unsatisfied. *#* Allowing homeowners associations and condo owners associations to have "super lien" priority runs contrary to this bedrock housing finance principle. *MBA's Position / Next Steps* *#* MBA strongly disagrees with the Nevada and DC court interpretations, which run counter to the aforementioned notion. In response, MBA is: Educating the industry about related risks and mitigation strategies; and *#* Working with partner associations and others to advocate for laws that would either mitigate mortgagee risk from this new super lien priority, retain the super lien as a payment priority, or remove the super lien outright-depending on the political climate. *#* MBA continues to monitor for state bills introduced that aim to align their laws with the DC and Nevada court interpretations, and MBA led advocacy efforts have defeated legislation in several states.
What is the MBA's perspective of a CSP? Why is a CSP important to GSE reform?
*Overview* *#* In 2013, the GSEs established a joint venture to build and operate the CSP (Common Securitization Platform) under the direction and guidance of FHFA. *#* Since this announcement, FHFA has heeded advice provided by MBA and others to limit the CSP to GSE issuance alone, simplifying the development requirements while allowing private issuers to continue utilizing and investing in their own platforms. *#* FHFA is developing the CSP and the proposed UMBS in tandem, with the framework for the UMBS dependent upon the CSP. *#* In November 2016, Release 1 of the CSP was successfully implemented. This milestone marked the beginning of Freddie Mac's use of the CSP to issues certain securities. Release 2, which includes issuance of the UMBS, is expected in the second quarter of 2019. *Impact** What:* dramatic upgrade from the antiquated and inflexible securitization infrastructures upon which the GSEs have previously relied. *WHY:* Completion of the CSP could also facilitate GSE reform *HOW:* Allowing multiple issuers to pool and issue qualifying securities in exchange for a future government guarantee. *RESULT:* Issuance of the UMBS should improve liquidity in secondary mortgage markets by eliminating trading disparities that currently exist between securities issued by Fannie Mae and Freddie Mac *MBA's Position* *#* MBA strongly supports the modernization of GSE business systems and software, particularly in tandem with the development of the UMBS. *#* MBA believes it is critical that the CSP be viewed in the long-term as a market utility open to all participants who are willing and able to pool eligible securities. *#* MBA believes that-as soon as practicable after Release 2-FHFA should direct that the CSP Master Servicing Module be completed and that the necessary work begin to allow private issuers to utilize the platform.
What's different about the URLA? What's the same?
*Overview* *#* In 2016, Fannie Mae and Freddie Mac (the GSEs) published a newly revised URLA. *#* The new form updates the information to be collected from borrowers, including the new Government Monitoring Information (GMI) data on race, ethnicity, and gender of borrowers to be collected under the revised Home Mortgage *#* Disclosure Act (HMDA) rules. The new GMI data must be collected for mortgages where creditor action is taken on or after January 1, 2018. *Impact* *#*Each URLA field also was designed to conform with the most recent MISMO data standard (v3.4), developed and maintained by the industry. *#* As of September 20, 2016, the GSEs have released a revised print-version of the URLA. A dynamic version that requires borrowers to complete only the sections relevant to their individual circumstances, and a Spanish language version of the form, are anticipated. *#* The new forms are closely aligned, but not perfectly aligned with HMDA data collection requirements. Of the 47 HMDA data elements: *(i)* 7 are not applicable to URLA (action taken and date, loan purchaser, commercial and reverse mortgages, home equity line of credit); and *(ii)* 3 are not supported by URLA (manufactured home details, legal entity identifier). *MBA's Position / Next Steps:* *#* The GSEs have not yet announced a mandatory effective date for converting to the new form; MBA will continue to work with members to identify issues and concerns specific to the form as they arise. *#* MBA will also continue to provide ongoing education to members about the form and HMDA implementation as January 1, 2018, approaches.
What is meant by Transitional authority?
*Overview* *#* The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (S. 2155) amended the federal Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act of 2008 to provide for a 120-day temporary transitional authority period for a bank mortgage loan originator (MLO) moving to a non-bank lender, or for MLOs already working for a non-bank lender seeking licensure in another state. *#* To mitigate these challenges faced by MLOs and their employers, several states have taken action - either independently or through collaborative efforts facilitated by the National Mortgage Licensing System (NMLS) and the Conference of State Bank Supervisors (CSBS). *MBA's Position)* *#* The BCFP should consult with the CSBS and others to discuss transitional authority implementation and the NMLS system. *#* BCFP should rescind Bulletin 2012-05 and issue expedited written guidance that: *#* Notes that federal law has been amended and now explicitly permits all federal MLO transitions for a period of 120 days; *#* Clarifies that all states must implement the law in 18 months; and, Offers a clear path for states to adopt transitional authority sooner than 18 months if they able to do so.
WTF is PACE Lending??
*PACE Lending* *#* MBA believes energy efficient home improvements can be beneficial for homeowners, but significant concerns exist when these improvements are financed with Property Assessed Clean Energy (PACE) loans-a financing structure lacking vital consumer protections and presenting lien priority risks to lenders, investors and guarantors. Accordingly, MBA supported S.2155, which enacted federal legislation to provide BCFP (Bureau of Consumer Financial Protection) the authority to subject residential PACE loans to Truth in Lending Act (TILA) consumer protections. *#* MBA also urges Congress to introduce legislation requiring PACE loan subordination in accordance with long-established lien priority *Overview* *#* More than 20 states have enacted legislation enabling the development of residential PACE programs, and residential PACE programs are operational in California, Florida and Missouri. *#* The exact structure, terms and conditions vary by program, state and municipality, but a variety of energy efficient home improvements are generally available for financing-ranging from solar panels to energy efficient appliances and windows, water conservation, etc. *MBA's Position / Next Steps* *#* Following enactment of S.2155, the BCFP should move quickly to promulgate rules to protect consumers from the dangers posed by residential PACE loans. *#*These rules must require federal TILA protections for residential PACE loans-including the BCFP's "Ability-to-Repay" and "Know Before You Owe" rules, Home Ownership and Equity Protection Act standards, etc. *#* MBA also believes federal legislation is needed to require PACE loan subordination to existing government-guaranteed or -insured mortgages (per the principle of "first in time, first in right"). *#* MBA supports state and municipal rules that would require PACE obligations to be recorded in proper lien priority, subordinate to all prior-recorded mortgages.
Preserving the value of Mortgage Servicing Rights. MSR
*Preserving the Value of Mortgage Servicing Right* *#* The ability to trade mortgage servicing rights (MSRs) in a deep and liquid market is a critical driver of both the cost and availability of credit. *#* Regulatory actions that impose punitive capital standards or impair the liquidity-directly or indirectly-of MSRs undermine the value of this important asset and will ultimately harm consumers. It is imperative that policymakers take a measured and balanced approach to regulation of mortgage servicing to avoid unintended adverse consequences. *Overview* *#* The right to service a mortgage is an important revenue driver in mortgage banking and serves as a natural hedge to cyclical mortgage production income. For many independent mortgage banks (IMBs), MSRs are a key asset on their balance sheet and help ensure that servicing IMBs have "skin in the game." For banks and credit unions, the servicing provides an important consumer relationship and source of revenue. *#* Moreover, the ability to sell MSRs to a third party in a competitive market is also a critical part of the mortgage value chain. *#* Over the past few years, there has been a significant shift in servicing market share from banks to non-banks. Depository institutions have been selling their MSRs in part due to new banking regulations-such as the Basel III bank capital requirements, the National Mortgage Settlement, and the regulatory requirements of the Dodd-Frank Act *MBA's Position / Next Steps* *#* State and federal policymakers should give proper weight to the importance of ensuring that residential mortgage servicing remains an economically viable activity and that MSRs remain an attractive asset class in a deep, liquid and competitive market. v Before enacting any additional regulation, policymakers should carefully analyze the existing regulatory infrastructure to determine where gaps exist and then coordinate appropriate responses among all stakeholders. They should also seek to evaluate effective requirements or best practices to standardize a servicer's regulatory requirements across government programs.
How does the mba propose that the GSE be managed in the end state?
*Regulated Utility Model* *#* MBA proposed that the Guarantors be regulated similar to investor owned utilities. *#* Regulatory Compact: Private firms that are granted an exclusive or limited number of franchises accept the responsibility to serve customer in an efficient and non discriminatory manner. *#* Benefits: Mitigates risk taking and the compulsion to grow BECAUSE Investors are provided with a steady dividend over time. *Competition:* i) efficient operations, ii) product and process improvements iii) Customer service.
Risk Retention Rule/QRM
*Risk Retention* *#*Rule/QRM In December 2014, six federal regulators finalized the risk retention rule, as mandated by the Dodd-Frank Act. *#* Compliance with the new rules was required by December 24, 2015 for residential mortgage-backed securities (MBS) and will be required by December 24, 2016 for all other asset-backed securities. *Overview* *#* The Dodd-Frank Act required the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve, the Federal Deposit Insurance Corporation, the Department of Housing and Urban Development, the Securities and Exchange Commission, and the Federal Housing Finance Agency (collectively, the Agencies) to develop rules to require issuers of asset-backed securities to retain at least five percent of the credit risk of assets they securitize. *#* For single-family MBS, an exemption from risk retention is provided for "Qualified Residential Mortgages" (QRM), which the Agencies must define using criteria that demonstrate a lower risk of default. Under Dodd-Frank, the QRM exemption may be "no broader than" the QM designation contained in the Act's Ability-to-Repay (ATR) rule. *MBA's Position / Next Steps * *#*MBA supports much of the final risk retention rule, as it reflects many of MBA's advocacy priorities. The rule represents an important step in rebuilding the private-label MBS market. *#* MBA will continue to monitor the implementation of the new rule and work with the Agencies to address any concerns or obstacles that may arise.
What is a 'single Security' and why is this valuable in the long term recovery of our industry?
*Single MBS* *#* Goal of the FHFA to develop a single MBS issued and guaranteed by Fannie/Freddie *#* Current securities issues by Fannie/Freddie are not interchangeable. *#* Single MBS would enhance access to the TBA Market, improve overall liquidity, reduce cost to taxpayers, lower barriers fore prospective new entrants and lay the ground work for a more competitive secondary market. *Common Securitzation Platform Definition:* *#* Tech and ops platform developed by Common Securitization Solutions. *#* Joint effort between Fannie and Freddie performing many back office operations for the Single Security as well as well as most of the securitization functions on behalf of the Enterprises. *Importance:* *#* Upgrades the infrastructures at the heart of the agency MBS market *#* Fosters alignment necessary to support the Single Security *How would it work?* *#* MBA believes it should be a government corporation run by the Federal Housing Finance Association (FHFA) *#* Natural Monopoly too big to fail or be owned by private entity *#* Other Examples: Federal Deposit insurance Corp (FDIC), Pension Benefit Guaranty Corp (PBGC) *#* Considered a natural Monopoly CSP would be run by its own executive and be funded through administrative fees on the issuance of MBS and not through federal appropriations *#* Issuing MBS would fall to the CSP It would be a Government Corporation and be considered as a natural Monopoly.
Streamlining State Advertising Disclosures
*Streamlining State Advertising Disclosures* *#* MBA urges state regulators--through legislation or rulemaking--to implement a uniform licensing disclosure protocol that directs consumers to the NMLS Consumer Access Website. If done nationally, reliance on such a protocol (See MBA's Proposal) would improve consumer disclosures regarding company licensing information. *Overview* *#* Currently required state licensing disclosures for print and electronic advertising are not achieving their intended objective of informing and protecting consumers because they convey little useful information. *#* In fact, when print, radio or television ads are circulated in multiple states, the preponderance of licensing disclosures render them collectively invisible to consumers. *#* Worse, in radio ads these disclosures require speed reading that is unintelligible and serves no practical purpose. *#* Most states have now adopted the Conference of State Bank Supervisors (CSBS) / American Association of Residential Mortgage Regulators (AARMR) model law provision requiring state-licensed mortgage companies and loan originators to exhibit their Nationwide Mortgage Licensing System and Registry (NMLS) Unique Identifier in their origination-focused consumer solicitations and advertisements. *MBA's Position / Next Steps* *#* MBA suggests that a more effective approach for consumers, lenders, and policymakers would be the adoption of a uniform protocol for disclosing licensing information in advertisements, which would: *#* Provide consumers with necessary clarity regarding the state licensing of mortgage companies and professionals; and Streamline the industry's representation of its state licensing statuses. *#* Accordingly, MBA is currently advocating for state legislator and/or regulator adoption of the following Proposal: *Synopsis:* Consumers should be directed through a uniform disclosure to NMLS Consumer Access--the comprehensive, state regulator-developed database for verifying the credentials and licensing status of mortgage companies and loan originators with whom they seek to do business.
TCPA Amendments. Telephone Consumer Protection Act
*TCPA Amendments* *#* In 2015, the Federal Communications Commission (FCC) adopted a proposal intended to protect consumers from unwanted "robocalls," but instead exposes mortgage servicers to significant liability for making good faith attempts to contact delinquent borrowers about their possible home-retention options. *#* Data following the housing crisis demonstrate that these calls are crucial to ensuring borrowers are informed of their options to stave off a foreclosure. Federal regulators require servicers to go to great lengths to establish borrower contact because it is the most critical step in foreclosure prevention. MBA has filed an Application for Review to exempt these calls from *Telephone Consumer Protection Act (TCPA)* coverage. *Overview* *#* The TCPA was enacted in 1991 to protect consumers against unwanted telemarketing calls to cellular telephones. At that time, the law could not comprehend the future in which cell phone usage has become increasingly widespread and many households now rely solely on cell phones as their primary means of communication. *MBA's Position / Next Steps* *#* MBA filed a petition for exemption and subsequent Application for Review because frequent communication and early intervention are essential to helping struggling homeowners resolve delinquencies and remain in their homes. *#* This exemption is necessary because of the importance of early intervention in delinquencies, the extensive national rules governing mortgage servicer conduct and the possible dire consequences of loss of a home for the borrower. *#* The Federal Housing Finance Agency-conservator of the GSEs-agreed with this reasoning and has called for an exemption for mortgage servicers in a letter to the FCC.[1]
Describe the trajectory that MBA like to take with TRID? What the hell is TRID?
*TRID Rule* *#* The TILA-RESPA Integrated Disclosure (TRID) rule became effective on October 3, 2015. A proposed rule to make corrections and offer additional clarity has not yet been finalized. *#* TRID's implementation remains a great challenge to the real estate finance industry. MBA urges the Consumer Financial Protection Bureau (CFPB) to continue working with the industry to enhance clarity and improve compliance with TRID. *MBA's Position / Next Steps:* *#* MBA urges the CFPB to issue its final rule amending provisions of the TRID rule in order to make corrections and provide additional clarity. *There remain numerous areas of confusion and the final rule will help decrease concerns.* *#* MBA has commented in areas where the Bureau has provided corrections-such the "Four Business Day Limit" for the provision of amended closing disclosures-and will seek continuing regulatory amendments where necessary. *#* MBA will continue to seek ongoing authoritative, written guidance from the CFPB-developed with stakeholder input-with regard to other difficult issues presented by TRID. *#* MBA is engaged in several areas to help its members comply. MBA will continue to: *i)*Conduct standalone webinars and provide meaningful opportunities at all MBA meetings-with the CFPB and other stakeholders-to focus on key implementation issues and options for resolution; *ii)* Work closely with other trade associations to facilitate compliance; *iii)* Offer up-to-date compliance guidance through webinars, forums and other venues, including MBA's Compliance Essentials (CE) resource guide, CE self-study and other materials to assist MBA members
Explain the new HMDA rule? What does it affect?
*The new Home Mortgage Disclosure Act (HMDA) Rule* *#* On October 15, 2015, the Consumer Financial Protection Bureau (CFPB) issued a new final HMDA rule that significantly expands the data points to be collected and reported by lenders. *#* The rule also changes the coverage requirements for institutions, transactions and reporting. Subsequently-on April 25, 2017-the CFPB issued a proposed clean-up rule to correct and clarify the 2015 rule. *Overview* *#* Lenders are to collect the new data required by the rule for loan actions on or after January 1, 2018, and they will need to report this data by March 1, 2019, using the CFPB's web-based submission tool for HMDA data reporting. *#* The new HMDA rule requires reporting on 48 data fields-adding 25 new data fields to the current 23-but also modifying 20 of the existing fields. The new data fields include those mandated by the Dodd-Frank Act, as well as fields required by the CFPB under its discretionary authority. *MBA's Position / Next Steps:* *#* The new final HMDA rule will require systems changes to be made for the next several years. Considering that by mid-2017 the CFPB has not yet finalized either its clean-up rule or its reporting protocols, MBA believes the CFPB should consider delaying the rule's implementation-or at minimum delaying enforcement pending completion of a testing and transition period. *#* MBA will continue to urge the CFPB to provide authoritative, written guidance-developed with stakeholder input-on difficult implementation issues as they arise. *#* The recent CFPB clean-up rule is at least in part an outgrowth of MBA's efforts.
What is the significance of the ATR/QM Rule? How does that tie into GSE reform?
*What is the issue?* *#* These standards need to be improved to ensure more qualified borrowers can access safe and sustainable credit. *#* Considering the significant potential liability and litigation expenses for an ATR violation, many lenders have limited themselves to making only QM safe harbor loans. *#* Those few that do offer non-QM loans charge higher rates in order to offset potential legal and compliance risks, even if the underlying credit risk is relatively low. *#* As a result, some categories of creditworthy borrowers that should qualify for a QM are have trouble gaining access to safe, sustainable and affordable mortgage credit. *Definition* *#* The ATR rule provides a presumption of compliance for loans that are originated as QMs. *#* In order for a mortgage loan to qualify as a QM, it may not contain certain "risky" features-such as interest only or negative amortization terms-and it must meet specified underwriting standards. *#* No DTI greater than 43% *#* No points or fees that exceed 3% of a loans on a loan greater/= than $102,894 *#* The rule establishes a compliance safe harbor for QMs if the annual percentage rate (APR) of the loan does not exceed the average prime offer rate (APOR) for that mortgage by 150 bps or more. *#*Loans to borrowers that exceed the APOR by more than 150 bps receive a rebuttable presumption of compliance if their loans otherwise qualify as QMs. *MBA Says* *#* Expand the Safe harbor. Threshold should be increased to 200BPS over APOR *#* Increase the Small Loan Definition *#* Broaden Right to Cure for DTI and other technical Errors *#* Replace QM Patch with the Default QM.
What is meant by 'Upfront Risk Sharing" in terms of the GSE?
*Why is this a benefit:* *#*Allows lenders to secure deeper credit enhancements in exchange for lower guarantee fees (g-fees) and loan-level price adjustments (LLPAs). *How is it done?* *#* This credit enhancement can take many forms, including "deeper cover*" private mortgage insurance (MI), lender recourse** and structured finance. *#* In 2016, Fannie Mae and Freddie Mac (the GSEs) began pilot programs to use up-front risk-sharing mechanisms to transfer mortgage credit risk. *#* These programs represent an important first step toward implementing the recommendations made in MBA's proposal for more permanent and diverse up-front risk-sharing to increase private capital in mortgage markets and better protect taxpayers *What is Deep Coverage MI?* *#* "Deep Coverage Mortgage Insurance" refers to extending the use of mortgage insurance, both by using deeper coverage on loans that currently require mortgage insurance (loans with less than a 20% down payment) and by using MI on loans that do not currently require it. There are many obvious benefits to this approach, including: *#* Deeper coverage is compatible with the mortgage origination and servicing "plumbing" Mortgage originators and servicers already have systems in place and know how to use mortgage insurance *#* Competition among 7 mortgage insurance companies brings an immediate increase in competition for pricing mortgage credit risk Mortgage insurance pricing is transparent and available to all lenders, regardless of size *#* Deeper coverage brings an immediate decrease in taxpayer risk, putting substantial additional private capital in front of taxpayers before the GSEs purchase the loans
Brookings Paper Warehouse Lending / Funding
1) (50 %) of every loan funded goes through a warehouse line. Average time on line = 15 days 2) The nonbank originator is the repo seller and the warehouse lender is the repo buyer in the origination transaction. 3) The nonbank originator is responsible for finding a willing buyer for the mortgage. Currently, these mortgage investors are the GSEs or Ginnie Mae investors. Once the mortgage is sold, the proceeds from the sale are paid to the warehouse lender, which holds the mortgage as collateral. The warehouse lender then releases the mortgage (trust deed) and promissory note to the mortgage investor (the pool created by the GSEs, the Ginnie Mae issuer, or the private label securitizer). The warehouse lender then pays down the dollar value of the draw to the non-bank's line of credit
FHA Policies and Programs
1) 65 % of African American Families obtained a GNMA loan in 2017. 83 % of all FHA loans in 2018 were 1st time homebuyers 2) FHA Conveyance - timeline - deventure interest, first legal - maximum allowable - loss mitigation processes are flawed 3) Unreimbursed foreclosed and REO costs for FHA loans are three times higher than for conventional loans 4) Defect / Default taxonomy - False Claims Act. Clarifies the levels of defects AND explains the severity of each 5) Banks are less than 15 % of TOTAL FHA Volume. They were almost half in 2010 6) Enforcement actions should be commensurate with mistakes made. Minor errors should not equal SEVERE penalties. 7) Defect taxonomy = improve clarity, certainty, transparency of regulations and requirements 8) Defect Taxonomy is at the loan level through the LRS (Loan Review System)
ATR (Ability to Repay)
1) ATR and QM kind of go together. QM mortgages cannot be risky. No neg am, interest only, balloon payment. Reg UW 2) DTI less than 43 % OR Eligibility of Fannie / Freddie / GNMA (QM Patch). Points less than 3 % 3) Loans of less than $100 K - you can charge more than 3 % on a sliding scale 4) High Cost loans do not receive safe harbor - but rather a rebuttable presumption
QM Patch
1) Appendix Q is obsolete (Old FHA UW Guidelines - does not account for self employed borrowers, alternative income, etc.. 2) It increases homeownership, allows for afforable credit through prudently UW loans above the arbirtry 43 % ATR/QM 43% 3) Eliminate the RIGID 43 % DTI ratio and Appendix Q. DTI IS NOT an accurate predictor of ability to REPAY or Safe Harbor 4) $260 BN in 2018 were above 43 % DTI. 17 % of total market in 2018. Roughly 10-12 % of the workforce are NON W-2. 5) If patch expires - without a plan - it would be disasterous. Where would borrowers go? More expensive loans? FHA? 6) 957,000 loans were purchased by GSE's under the NON QM patch in 2018 7) If Patch expires up to 1/3 of Fannie / Freddie volume could go away. Is private capital ready? Can FHA handle volume?
MBA Coronavirus (COVID-19) Main Issues
1) Appraisals and Re-Verification of Employment 2) GSE Eligibility Requirements for Purchase and Refinance Transactions Following Forbearance 3) FHA Temporary Waiver of QC Requirements for Early Payment Defaults and Field Reviews of Appraisals; COVID-19 Impact on Compare Ratios 4) Business Continuity 5) eRecording (also see RON Resources)
GSE Reform Treasury disbursed $187 BN Recouped $250 BN
1) Borrowers will be DENIED a more vibrant secondary market. Lenders will face uncertainty for the future 2) Private label / investors will hesitate to engage in the primary and secondary market 3) Ensure Guarantee fees are fair and equal, that there are no special deals for specific lenders, level playing field 4) Create a Single MBS for Fannie / Freddie. Explicit Guarantee by Congress of that MBS. Ensure private 1st loss positions 5) Ensure liquidity through all economic cycles. Strong oversight, regulation and capital supervision, market transparency 6) Taxpayer protection, prevent charter / scope creep, empower FHFA to grant charters to NEW Guarantors 7) Ensure affordable housing exists. Preserve 30 year - fixed rate - prepayable - mortgage. 8) Minimal corporate debt, minimal retained investment portfolio. GSE Capital Requirements. No more treasury sweep 9) CSP (Common Securitization Platform) = Single Security. 10) GSE's have had unlimted tech spend. CRT deals - risk sharing. GSE's guarantee over $5 TR of MBS
LIBOR Transition
1) LIBOR set to expire in 2021 2 $350 TR in Loans are on LIBOR 3) SOFR - Secured Overnight Finance Rate is the NEW LIBOR 4) SOFR is an OVERNIGHT RATE - it is MUCH MORE volitile that LIBOR - it shot up like 600 BPS a while ago 5) There is very poor transition language in legacy RMBS 6) According the the MBA 77 % of all firms say they have fallback LIBOR language in loan documents 7) Index will likely be lower and payment will likely be lower for borrowers
LIBOR Transition
1) LIBOR set to expire in 2021 2) $350 TR in Loans are on LIBOR 3) SOFR - Secured Overnight Finance Rate is the NEW LIBOR 4) SOFR is an OVERNIGHT RATE - it is MUCH MORE volatile that LIBOR - it shot up like 600 BPS a while ago 5) There is very poor transition language in legacy RMBS 6) According the the MBA 77 % of all firms say they have fallback LIBOR lanague in loan documents 7) Index will likely be lower and payment will likely be lower for borrowers
The Brookings Paper Dangers of Warehouse Fundings
1) Margin calls due to aging risk (that is, the time it takes the nonbank to sell the loans to a mortgage investor and repurchase the collateral), 2) Mark-to-market devaluations, 3) Rollover risk 4) Covenant violations leading to cancellation of the lines. Cross default clause = default on 1 line - default on ALL lines 5) Changes in warehouse lender risk appetite
PACE Lending ( Property Assessed Clean Energy) Loans
1) NO consumer protections. 2) Lien priority risks exist to lenders, guarantors and investors 3) Not Subject to TILA or CFPB 4) No standardized review of income, credit, underwriting, monthly payments, etc.. 5) Loans are based on equity in the property AND their mortgage and property tax history 6) Payments are added to property tax bill and thus are SENIOR LOAN POSITIONS 7) PACE obligations are purchased by municipal revenue bonds. These bonds are secured payments on pace loans.
HMDA
1) New rule adds 25 new data fields to the current 23 - but modifies 14 of the existing fields 2) Covered institutions must collect, record & report information for approved but-not-accepted preapproval requests 3) Extensive implementation costs and major challenges - especially on heels of TILA - RESPA (TRID) rule 4) Privacy / Data / Security concerns - confidential information (Credit Scores) 5) A security breach of this information could result in harm to the lender (lawsuit) or borrower (denial of loan) credit score
LO Compensation Rule
1) Permit voluntary reduction by MLO to their comp to be competitive to benefit the borrower. This enhances competition 2) Currently... a lender must make an unprofitable loan. This is stupid. MLO gets full comp for a discounted loan. 3) Allow lenders to hold employees financially accountable for bad loans and originator errors / fraud. 4) Allow variable comp for HFA loans. HFA loans are more expensive to originate. CFPB forbids variable comp
CFPB Servicing Issues
1) Regulation through examination and enforcement 2) FDCPA falls under CFPB as does all loss mittigation and Dodd Frank - Supervision and Enforcement Powers 3) Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) falls under CFPB 4) Many CFPB rules are unclear and these rules are extremely costly to implement and time consuming 5) Some rules are not always beneficial to borrowers 6) Perpetual state of audit
Basel III
1) Risk weighting is being increased from 100% to 250% 2) Decreases MSR cap for banks to 10 %. Above 10 % - banks must deduct dollar-for-dollar from regulatory capital 3) MSR's limited to 15 % common equity component of Tier 1 capital. Above that - they must be deducted from regulatory cap 4) The above makes MSR's one of the most COSTLY assets a bank can own / hold. Even though the risk proves otherwise 5) When banks lose servicing - they lose income - they lose borrowers - they place risk on thinly capitalized non banks
CFPB 2.0
1) Rulemaking. Create a Rule on Rules. Advance notice on Proposed Rule Making 2) Enforcement. Clarify the REASON to Believe. Provide SPECIFIC reasons. Allows REALISTIC timelines. Disclose Conclusion 3) Supervision. Expect compliance - not perfection. Examination should mirror entities risk. 4) Market Monitoring. Withdraw Public facing complaints. 5) Regulations. Originator Comp. ATR / QM. TILA / RESPA. HMDA. 6) Establish a Civil Monies Matrix. Be Transparent. 7) END Regulation by Enforcement. 8) Allow for Removal to Federal Court 9) Allow Loan officers to benefit the borrowers. Allow companies to hold loan officers accountable for their mistakes. 10) Loan Officer Comp. Only get paid on VOLUME of loans. No incentive for Quality.
The Brookings Paper RMBS's Trust Waterfall
1) Servicer is repaid 1st - BEFORE the bond holders from the proceeds before the foreclosure 2) Therefore... Servicing advance asset backed securities are rated AAA. Yields are 1-2 %. 95 % leverage. 3) In 2007 - the private-label RMBS market was enormous— $2.7 trillion—and the Ginnie Mae market was both small—$400 billion 4) Non banks originate loans with higher DTI's, Lower FICO's 5) Ginnie Mae has about 150 core staff members to handle its nearly $2 trillion in outstanding MBSs 6) The FHA Deliquency rate in September 2019 is 9.5 % 7) The FHA Deliquency rate in September 2018 was 3.7 % 8) More than 50 % of Black and Hispanic buyers have GNMA loans
GNMA Stress Testing
1) Stress test should not be used as a stand alone factor by GNMA 2) Results should not grade / judge all issuers - but instead identify outliers and be a tool for discussion 3) Results should be confidential 4) GNMA has grown from $750 MM in 2009 to over $2 TRN in 2019. Non Depositories are 78 % of GNMA issuers 5) Eliminate the 4 Tier Rating System. Pass, Watch, Potentially Non-Compliant, or Potentially Deficient. 6) The data is cloudy - ambiguous and comes from the MBFRF (Mortgage Bankers Financial Reporting Form) 7) The framework DOES NOT address the remediation of identified weaknesses or consequences for poor stress test results
Flood Insurance
1) The National Flood Insurance Program (NFIP) provides over 5 million property owners with insurance 2) Hurricans Katrina, Rita, Wilma, Sandy, Matthw, Harvey, Irma, Maria, put the NFIP 25 BN in debt 3) The program is currently unstable. It needs funding. 4) The NFIP authorizes 1,300 homes each day and about 40,000 homes a month 5) It is advised that a PRIVATE flood insurance market be allowed to develop
Brookings Paper 2008 Crisis
2008 Crisis: The collapse of the housing bubble fueled by low interest rates, easy and available credit, scant regulation and toxic mortgages. Bear Stearns failed in 2008, while the firm was arguably still solvent, when a sudden "Wholesale Run...impeded the investment bank (from) obtaining funding on both unsecured and collateralized short-term financing markets"
Frequently Asked Questions on MBA-ALTA Model Bill
A few key FAQ's from the PDF: What is the difference between RON and electronic notarization? • In person electronic notarization (IPEN) occurs when a notary and signer are in the same physical location. • Remote online notarization occurs when the authentication and signing process take place using two-way real time audio visual technology, which enables the signer and notary to see and hear each other simultaneously. Typically, an online notarization session culminates with an electronic notarization. BACKGROUND During 2017, Texas enacted a law (which was quickly emulated by Nevada) that achieved wide consensus in how it allowed remote online notarizations to have the same validity as in-person notarizations. This is the template, along with additional state-to-state standardization recommendations and MISMO (Mortgage Industry Standards Maintenance Organization) standards that MBA-ALTA have advocated for with remaining state legislatures. This included input from federal policy makers- MBA and ALTA shared early drafts of the model with, and received feedback from, Fannie Mae, Freddie Mac and the Federal Housing Administration.
GNMA Policies and Programs Overview
As the agency responsible for providing a full-faith-and-credit U.S. government guaranty on mortgage securities backed by FHA, VA, RHS, and PIH loans, Ginnie Mae attracts global capital to a critical segment of the domestic housing finance system. Overview: As Ginnie Mae's outstanding volume of guaranteed securities increased from $600 billion to over $2 trillion in the past decade, the importance of ensuring its well-functioning operations has only risen. MBA supports providing Ginnie Mae with adequate resources to allow for innovation, technological enhancements, and appropriate counter-party oversight. Ginnie Mae guidelines and requirements should be transparent and fair to all issuers. 2 Goals for GNMA: 1) Enhance counterparty risk standards 2) Attract long term stable capital into the mortgage system through investment in GNMA Servicing MSR's MUST allow the servicer to keep at least 25 bps.
Brookings Paper Buybacks & Repurchases
Buy Backs & Repurchases. By 2016 GSE's clawed back / collected $76.1 BN HUD / DOJ collected more than $6.6 BN through the False Claims Act
Technology Resource Center White Paper: The Basic Components of an Information Security Program
COVERS "The Basic Components of an Information Security Program 2019 Revision" The White Paper/Guide borrows from the NIST Small Business Information Security" The Fundamentals document issued in November 2016. Includes regulatory bodies over various topics such as, Privacy and Security, General Information Security, Cyber security, Vendor Management As components of a security program, NIST terms are used to identify five framework/core functions: "identify", "protect", "detect", "respond", and "recover". Cyber attacks by industry reflect that Financial Services comprise 8%. (60% is Government)
Data Security & Privacy Laws Letter: MBA to Council of State Governments on the California Consumer Privacy Act (September 13, 2018)
California Consumer Privacy Act of 2018 (CCPA) MBA commentary is, CCPA as written incorporates provisions of a flawed state law, legislated under duress, and does not even reflect current California law. Consequently, states that use this as a model risk hampering the industry's ability to provide consumers with the very financial products they request. CCPA: The right to know about the personal information a business collects about them and how it is used and shared; • The right to delete personal information collected from them (with some exceptions); • The right to opt-out of the sale of their personal information; and • The right to non-discrimination for exercising their CCPA rights. • Businesses are required to give consumers certain notices explaining their privacy practices. The CCPA applies to many businesses, including data brokers. LAWSUITS ON DATA BREACH One can only sue businesses under the CCPA if certain conditions are met. The type of personal information that must have been stolen is your first name (or first initial) and last name in combination with any of the following: • Your social security number • Your driver's license number, tax identification number, passport number, military identification number, or other unique identification number issued on a government document commonly used to identify a person's identity • Your financial account number, credit card number, or debit card number if combined with any required security code, access code, or password that would allow someone access to your account • Your medical or health insurance information • Your fingerprint, retina or iris image, or other unique biometric data used to identify a person's identity (but not including photographs unless used or stored for facial recognition purposes) This personal information must have been stolen in nonencrypted and nonredacted form. Civil Code: http://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?division=3.&part=4.&lawCode=CIV&title=1.81.5
CFPB 2.0 Advancing Consumer Protection Enforcement
Clarify the "reason to believe" standard for issuing a CID (Civil Investigative Demand). Provide the specific notifications of purpose for the CID. Petitions to modify or set aside a CID should be confidential. Timelines should be realistic. Entities are entitled to know when an investigation concludes. End Regulation by Enforcement permanently. Limit UDAAP (Unfair, Deceptive, or Abusive Acts or Practices) Enforcement to clearly defined UDAAP standards. Be transparent in the early stages of investigations. Establish a civil money penalties matrix. Allow for removal to Federal Court if respondent elects to do so. Do not proceed with administrative adjunctication until procedural deficiencies are addressed.
Data Security & Privacy Laws
Consumer data privacy and data security must be addressed uniformly to avoid a patchwork of confusion. Overview: Federal laws on consumer data privacy and data security cover various industries and individuals. Financial institutions are governed by the Gramm-Leach-Bliley Act (GLBA). However, there is no federal data breach notification law. In contrast, there are over 50 different non-federal data breach notification laws throughout the United States. MBA member companies cannot separate their information technology infrastructures to comply with varying state requirements, as well as those of the federal government. MBA continues to advocate for federal standards on matters of data privacy and data security and a federal preemptive data breach notification law.
CFPB 2.0 Advancing Consumer Protection Rule-making
Create a "rule on rules" that promotes responsible rule-making. Adopt a clear guidance policy - allow for public feedback. Ensure guidance is True and Reliable. The Bureau should issue advisory opinions
Data Security & Privacy Laws Comment Letter: MBA to CFPB on Data Collections and HMDA (December 21, 2018)
DEC 21, 2018 Request for Information Regarding Bureau Data Collections, Docket No, CFPB-2018-0031 Urging the Bureau to place consumer privacy concerns at the forefront of its data collection efforts. Additional items for consideration: 1. Avoid the collection and use of privileged data. 2. Limit the scope of the burden placed on industry during section 1022 reviews. As a general matter, satisfying loan-level data requests is particularly burdensome. It is relatively less burdensome to produce enterprise-level data. 3. Utilize the existing industry standards issued by MISMO. Section 1022(d) of the Dodd-Frank Act requires the CFPB to "conduct an assessment of each significant rule or order adopted by the Bureau," which must specifically address "the effectiveness of the rule or order in meeting the purposes and objectives of [Title X of the Dodd-Frank Act] and the specific goals stated by the Bureau."
Servicing Government Loans Comment Letter: MBA Comments on Proposed Debt Collection Rule (September 18, 2019)
Debt collection rules apply to all debt collectors with no specific call-outs for mortgage which underlies all of the MBA objections; MBA calls for no limits on telephone calls for loss mitigation purposes; time of day for calls is based on area code which may not reflect the actual location of the borrower so MBA asks for use of the borrower provided mailing address
MBA Coronavirus (COVID-19) Business Continuity
Engage in corporate risk assessment. Identify critical business functions. Identify and categorize essential job functions - including whether required at the workplace, can work from home, or not needed during an outbreak. Establish plans and preparations to be able to respond in a flexible way to varying levels of severity of the disease; including: Cross-training personnel in response to a possible increase in the number of absent/sick employees. Crafting strategies that test different programs, including split workforce strategies. Upgrading IT capabilities to accommodate a possible increase in remote/off-site work arrangements. Test emergency communication channels (internal and external). Create executive or management response procedures. Develop messaging for borrowers - including the impact or effect of an outbreak on the company's services or operations.
GSE Conservatorship (Reform) This is the last unfinished business of the financial crisis
FNMA and FHLMC are in conservatorship to preserve and conserve their assets and property, and restore them to a sound financial condition so they can continue to fulfill their statutory mission of promoting liquidity and efficiency in the nation's housing finance markets. The FHFA was assigned powers of management, board, supervision and shareholders. On May 21,2929 the FHFA officially set the stage for FNMA and FHLMC's exits, issuing new rules that would allow both government-sponsored enterprises "GSE" to build capital in preparation to leave conservatorship and privatize. As part of the new proposal, both companies would be required to have a combined $234 billion in capital on hand.
Brookings Paper Credit Risk FNMA/FHLMC vs GNMA
FNMA/FHLMC - The borrowers lose their equity (initial credit loss) - Private Mortgage Insurance Co takes a second loss - Then...the GSE takes their loss - With CRT (Credit Risk Transfer) - FNMA/FHLMC are even Lower in the credit stack GNMA - The borrowers lose their equity (initial credit loss) - The Government entity that guarantees the loan (FHA, VA and USDA) - The GNMA issuer / servicer then takes the loss - GNMA covers credit losses Only when the resources of the issuer / servicer are exhausted.
Comment Letter MBA to CFPB on Requests for Information
Focal Points 1) CFPB should provide guidance through regulation rather than enforcement and be written in such a way the stakeholders understand and can implement prior to audits / enforcement 2) Emphasize due process and consistent enforcement including clear definitions of abusive and unfair practices related to UDAAP 3) Maintain a level playing field for all mortgage participants 4) Address the consumer complaint database issues by confirming complaints before publishing, and measure the benefit of public disclosure v. the cost
Servicing Government Loans Joint Trades Letter: Coalition to HUD on Claims Without Conveyance of Title (CWCOT) (March 9, 2020)
Foreclosure process requirements stifle efficiency and increase costs Servicers must assure the property is in 'conveyable condition' w/in 30 days of access to the property which is very aggressive (being addressed in the March 2020 letter) Loan modification guidelines to not embrace learnings from the crisis (lower payment saves loans) but continue to rely on origination criteria for qualifications MBA Analysis FHA: Amend FHA foreclosure regulations to integrate all timelines into one, reward lenders for meeting aggregate timelines rather than penalize for each one that is missed and standardize loss mitigation efforts to benefit the borrower through a focus on streamlined paperwork and payment reduction
Brookings Paper The difference between GSE and GNMA and their Guarantees
GNMA: Full faith and credit of US Government - Originate or purchase loans - then issues securities themselves through the GNMA Platform. For GNMA Pools-the standards are set by the government agency that provides the insurance or guarantee on the mortgage (FHA, VA, USDA) FNMA/FHLMC: Guarantee MBS - They are government sponsored enterprises (Different!) - Purchase loans from originators and issues FNMA FHLMC securities themselves
Private Label Securities Market (PLS) Overview
In the years following the financial crisis, issuance of mortgage-backed securities without a government guaranty has remained lackluster, keeping private capital on the sidelines as government-supported loans continue to dominate the market. Overview: The market for private-label RMBS is an important channel by which private entities, rather than taxpayers, invest in mortgage credit risk. While fundamental problems in this market were exposed a decade ago, solutions have been more difficult to implement than many expected. MBA supports both market-based and policy-based reforms that would make the private-label market more attractive as opposed to reforms that aim to "crowd in" private capital through regulatory measures to shrink the agency market.
KBYO/TRID Issue Summary
Issue Summary: The new forms are a significant improvement but the rules guiding issuance are complex, incomplete and / or contradictory creating confusion for creditors and added cost for consumers. Furthermore, the structure imposed to manage changes to fees is overly complex, confusing and can be illogical.
Credit Risk Transfer Program
It is a vehicle for the GSE's to reduce the amount of risk carried within MBS pools by allowing private sector investment to acquire a portion of the outstanding principal balance in the pool; and associated risk. This means that in the case of credit/defect losses, the amount offset with CRTs is not guaranteed by the GSE, meaning that taxpayers do not get hit with the amount offset that would normally be covered under the full guarantee of the agencies (FNMA/FHLMC).
Credit Risk Transfer Program MBA Comment Letter to FHFA on Enterprise Capital Requirements
KEY MBA COMMENTS • The level of required capital implied by the framework is too high and may be determined too frequently by a leverage ratio rather than risk-based standards. • The treatment of credit risk transfer mechanisms is far too punitive and would discourage broad and diversified use of these mechanisms. • Pricing discounts, favorable underwriting requirements, and credit variances based on the volume, size, or business model of single-family lenders should be prohibited. • FHFA should support and facilitate the expansion (both in volume and type) of the Enterprises' credit risk transfer (CRT) programs in a manner that ensures similar levels of protection across differing structures. • Acquisition of a controlling interest in an Enterprise by a mortgage lender or servicer should be prohibited in order to prevent "vertical integration." • FHFA should promote enhanced public access to Enterprise data beyond the data published in support of the CRT programs. • A more explicit guarantee on the Enterprises' single-family and multifamily MBS would promote secondary market liquidity and the broad availability of affordable mortgage credit.
CFPB 2.0 Advancing Consumer Protection Regulations
Loan Originator Compensation: Allow loan officers to make competitive concessions. Allow companies to hold loan officers accountable for mistakes on particular loans. Create an exception to allow for variable compensation on housing finance agency loans. Ability to Repay / Qualified Mortgage Rule: Allow for Government regulated underwriting standards to replace Appendix Q. Extend the GSE Patch. Raise the CAP on points and fees. TILA / RESPA Integrated Disclosure Rule: Clarify TRID Liability. RESPA Section 8: Issue Guidance on the application of RESPA Section 8 common business industry arrangements. HMDA: Eliminate the discretionary data elements. Exempt business to business loans secured by multifamily properties. Increase privacy protections with respect to publicly reported HMDA Data.
Data Security & Privacy Laws Letter: MBA to Senate Banking Committee's Request for Comment on Data Privacy and Consumer Protection (MARCH 15, 2019)
MARCH 15, 2019 LETTER SUMMARY • As consumers continue to provide more of their personal information to businesses, personal privacy and data security becomes an increasingly necessary focus. • While mortgage lenders are particularly sensitive to data privacy of consumers, with additional legislation, we want to be careful not to prevent the careful use of data to improve the efficiency of mortgage origination. • While data breach issues extend beyond state resident concerns (in that it is a National Security concern), applying a federal guideline for best practices, could help manage through overly prescriptive layers of varying state rules. • Advocating for a non-prescriptive, pre-emptive federal regulation over data breach notification
Data Security & Privacy Laws MBA Position Data Security & Privacy Laws
MBA POSITION While many states have increased focus on data privacy and security issues, there is no federal data breach notification law. As these issues naturally cross state borders, and it is imperative that any further action on data privacy and data security be done at the federal level, removing any confusion that might be caused by the vary in state level requirements. IMPACT With varying state regulations, it makes it expensive for companies to comply. With a preemptive federal law in place, it could provide further protections for consumers while standardizing data breach notification rules. MBA'S POSITION / NEXT STEPS MBA has generally advocated for federal legislation on matters of data privacy and data security. In letters to the Treasury, CFPB, and Congress, MBA has expressed a need for uniformity in light of the national nature of operations involving data and the Internet.
MBA POSITION KNOW BEFORE YOU OWE/TRID
MBA Recommendations on this Issue are as follows: 1) Amend Reg Z to clarify the liability associated with TRID errors 2) Clarify what constitutes a bona fide personal financial emergency 3) Simplify and relax tolerance requirements 4) Clarify how post-consummation CDs must be completed 5) Mailbox rule should be modernized 6) Create additional model forms 7) Provide guidance on TRID rule requirements for wholesale transactions 8) Revise the definition of 'Application' to allow critical information necessary to process and provide the LE 9) Clarify the 3 business day waiting period: not apply to CDs delivered to non-borrowers who have a right to rescind
Technology Resource Center
MBA Stance and tone of letter to Treasury on topic of FINTECH: regulatory uncertainty and complexity discourages innovation. It limits the number of potential innovators and users, which means less innovation. With less innovation, the benefits of innovation [for consumers] - including greater efficiency and credit accessibility - are less likely to accrue.
CFPB 2.0 Advancing Consumer Protection The Roadmap to CFPB 2.0
MBA seeks to create a safe and inclusive mortgage market with clear rules of the road and robust protections. -Rule-making -Enforcement -Supervision -Market Monitoring -Regulations
MBA-ALTA Model Bill Section-By-Section Description
MBA-ALTA Bill Outline The Secretary of State for each state has the authority to implement standards to facilitate remote online notarizations. However, are usually subject to State House Legislatures to draft the appropriate laws to support these processes. This is one of the significant reasons that MBA-ALTA have provided guidance on standardized rulemaking proposals for remaining State Houses to consider in drafting their legislation. The template outlines- • Rulemaking • Standards for Online Remote Notarization (following MISMO Standards) - Proposed bills provide Sec State 12 months to adopt and enact standard for credential analysis and identify proofing. ADDITIONAL TOPICS in the outline- • Application; Qualifications - The criteria needed to be a remote online notary public, and the standards to comply. • Registration Required - What the technology used will be by the remote online notary public, and registration in the Sec State database once completing a required instruction course. • Authority - Provides guidance on where remote notary publics can perform notarial acts; e.g. anywhere in the state, or remotely located. Certain rules apply for those parties located outside the United States, providing the notary public has no actual knowledge about any restrictions in the jurisdiction the person is located • Electronic Record of Online Remote Notarizations - Requirements around safe keeping and documentation of recordings in an electronic form. The electronic journal must be maintained for a least ten years after the date of the transaction or proceeding. • Use of Electronic Journal, Signature, and Seal - The remote online notary public's electronic signature and seal must only be used and maintained by its owner. It must allow tracking or show evidence of any tampering of a signed and sealed electronic certificate. • Online Remote Notarization Procedures - The remainder of the template outlines additional procedures, such as; - The principal is not required to be physically located in the state at the time of the online notarization, etc. • Fees for Online Notarization • Termination of Online Remote Notary Public's Commission • Wrongful Possession of Software or Hardware; Criminal Offense • Conflict o In the event of conflict between state provisions, the provisions of this Chapter will control. • Effective Date of Act Additional procedural considerations: 1) Recording of an Electronic Record 2) Acknowledgement of Online Notarization 3) Recordation of Electronic Records in Tangible Form a. Allowing for a paper version of the electronic document be valid for recording without additional seal.
Technology Resource Center MISMO
MISMO is largely an industry volunteer based organization, acting as a standards development body for the mortgage industry. MISMO developed a common language for exchanging information for the mortgage finance industry. Today, MISMO standards are accepted and deployed by every type of entity involved in creating mortgages, and they are required by most regulators, housing agencies and the GSEs that participate in the industry. Use of MISMO's standards has been found to lower per loan costs, improve margins, reduce errors and speed up the loan process by reducing manual, paper-based processes while creating cost savings for the consumer. MISMO is a wholly owned subsidiary of the Mortgage Bankers Association. MISMO stands for Mortgage Industry Standards Maintenance Organization.
MBA Coronavirus (COVID-19) eRecording (Also see RON)
Many lenders are transitioning rapidly to eClosings to help support shelter-in-place and work-from-home status as a result of COVID-19.
The Brookings Report Capital Issues and Effect on Warehouse Lending Five vulnerabilities of warehouse funding of IMBs
Margin Calls: Occurs when an investment incurs enough losses that the investors margin account goes below a certain amount, known as maintenance margin. When a margin call happens, the brokerage will demand add funds or securities to the margin account to get back over the maintenance margin. 1. Margin Calls due to Aging Risk (tardy loan sales). That is, the time it takes the non-bank to sell the loans to a mortgage investor. 2. Mark to Market Devaluations/Margin Calls If the mortgage interest rates rise sharply while the mortgage is in the warehouse facility, the mortgage will fall in value. 3. Rollover Risk When the term of warehouse line expires, the non-bank must negotiate a new contract with the warehouse lender. Possible higher funding costs 4. Covenant Violations leading to cancellation of lines 5. Changes in warehouse lender risk appetite
The Brookings Paper Mortgage Servicing Rights (MSR's)
Mortgage Servicing Rights (MSR's) 1) The separation of loan servicing from loan origination, occured in 1991 when the Resolution Trust Corp (RTC), a government-owned asset management company charged with liquidating the assets of failed S&L's, devised new legal structures that enabled the separate sale of mortgage-servicing rights from loan portfolios. 2) Banks want/need to sell MSR's due to Basal - Capital treatment risk weighting of holding MSR's 3) NRZ is the 5th largest holder of MSR's in the United States as of 2017 ($353 BN) 4) Sub-servicers allow non-banks to hold MSR's without infrastructure. Sub servicers hold more than 20% of all existing loans or $2 Trillion.
Data Security & Privacy Laws Comment Letter: MBA and NYMBA to New York State Department of Financial Services regarding Online Lending in New York State (May 17, 2018)
NEW YORK STATE ONLINE LENDING LEGISTLATION LETTER, MAY 17, 2018 MBA COMMENTS: Legislative intent on this issue is not to include mortgage lending within the scope of "online lending". • It would be easy to confuse "online lending" with what some lenders in our industry are offering in terms of greater levels of in-person electronic and online services to help speed loan origination and mortgage closing. • These services are regulated in the same fashion as "traditional" brick-and-mortar mortgage lending activities. Mortgage lenders operate in an environment which has robust supervision of all aspects of operations. Our member companies have spent the last ten years implementing and investing in technology and system changes to comply with dozens of new federal and state laws and regulations which stem back to the Secure and Fair Enforcement of Mortgage Licensing (SAFE) Act of 2008 and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) of 2009. • MBA is not aware of any regulatory gaps regarding consumer protection that apply to mortgages originated using online portals for consumers to apply, submit documents and communicate with their mortgage lender.
MBA Coronavirus (COVID-19) Business Continuity - [Security]
NOTE ON PREVENTING ADDED RISK OF PHISHING AND RANSOMWARE ATTACKS ON WORK-FROM -HOME EMPLOYEES: The extra precautions people should be aware of are, first they shouldn't be clicking on anything that looks suspicious. They need to pay attention to all of the flood of information about the pandemic. People offering to help, companies who are offering help, they need to be really careful with their official sources for pandemic information such as the [Center for Disease Control], they only need to go to trusted sources, that's a big one. There's definitely an increased volume of those types of phishing attacks. Second, they need to make sure that if they need to work outside of their home, they need to use a WiFi connection that is a trusted connection. I think the third one is definitely if they are going to use any critical application, or they need to access code repositories, development environments, anything that could potentially be touching production environments, or any critical business applications, or data customer data, they need to use VPN. Or, they need to use another secure channel, such as VDI. So, there are some secure mechanisms of accessing critical applications, critical systems that must be utilized in these types of remote working situations. .
Comment Letter MBA to CFPB on RFI regarding Adopted Regulations and Rule-making Authorities
Note: this document is overarching and the bullet points below apply only to the KBYO/TRID Issues called forth 1) The intent of RESPA / TILA were to provide consumers with cost estimates; TRID transformed this into cost guarantees 2) The CFPB expanded the Dodd-Frank directive to update the forms to also impose tolerance complexities and reissue directives 3) No ability to correct errors on the LE or CD without consequence 4) A personal financial emergency was intended to assure a lender didn't close a loan for a borrower that is on the verge of foreclosure which doesn't align with any lender's practices 5) The post-close CD is not designed for post-closing activities 6) Tracking of timing assumes snail mail or hand delivery when most of these documents are now delivered electronically 7) CFPB have not kept their sample forms current with rule changes 8) Management of brokered transactions and creditor requirements for these transactions are needed 9) Non-borrowers may not have had the opportunity to provide electronic contact information and so when the CD is issued, the time-frame required can be longer due to the mailbox rule while everyone waits for the non-borrower to receive their document
Credit Risk Transfer Program FHFA CRT Progress Report
Over the last several years, GSEs have transferred about two-thirds of overall single-family credit risk in the CRT market. FHFA believes that current capital treatment of CRTs adequately cover: • Uncollateralized counterparty risk • Risk of loss after CRT deal expires • Risk of loss due to GSEs to allocate capital to cover losses across entire portfolio Mark Hansen, on a call with the CMB Study Group, made reference that the CRT programs have largely been put on pause. In March 2020, liquidity in CRT dried up completely. In fact, some investors came back to the GSEs, asking to be made whole (counter-intuitive to the purpose of the security to begin with). Key considerations: • GSE Capital Requirement are still under review by FHFA • FHFA'S proposed capital rule significantly reduces GSE incentive to off-load credit risk o Additional capital charges and 10% risk-weight floor together cut relief to GSEs coming from CRTs o Capital requirements of 4% or more make CRTs non-economic o This pushes GSEs to retain 85% to 90% of their risk o FHFA proposes imposing a 10% risk-weighted floor on retained CRT exposure, irrespective of how remote the risk • Upcoming elections will likely have some bearing on what future considerations will be While Private Mortgage Insurers typically hold a minimum of 10% capital to cover their risk positions, adding the same requirement to the GSEs when offsetting risk with insurance/reinsurance transfer instruments could be seen as duplicative and excessive. FNMA paused selling CRTs -MI Companies sell their risk to private investors as well -MI companies are asking FHFA to reconsider capital requirements for GSEs
Remote Online Notarization "RON" Progress
Remote Online Notarization (RON) is what it sounds like- the use of virtual, audio/visual, technologies to conduct notarial needs where the notary public and principal requiring notarization of key loan documents are in separate physical locations. As a component of eClosing, in order to fulfill a fully digital mortgage process to be available to all consumers, it is imperative that consistent state laws be passed in all 50 states, Washington DC, and Puerto Rico. • Over 25 RON bills have been introduced in more than 15 state legislatures during 2020; • Twenty-six states have enacted RON legislation; • In 2020, MBA released a model exetutive order for state leaders to safely enable remote notarization during the COVID-19 pandemic and, • MBA continues to work with state partners to advocate for legislation consistent with the MBA-ALTA (American Land Title Association) model. Recent news: New Mexico didn't pass. Montana re-hauled their RON law initiative for re-review 3 Keys for ongoing advocacy: Model Bill on MBA RON Resource Point policy makers towards MISMO standards to draft bills Advocate for MBA-ALTA Model Legislation in States without RON
Brookings Paper Servicing
Servicing Non Banks are: 38% for FNMA 35% for FHLMC 60% + for GNMA
The Brookings Report
With IMBs representing 50% or more of all mortgage originations, liquidity to these insititutions are fundamental to maintaining stability in the U.S. Housing market...Most IMBs carry a B risk rating by their warehouse lender...IMBs that carry more than one warehouse line typically receive better rates than those with only one (the largest IMBs can maintain upwards to 10-15 warehouse lines) ...various technological and process enhancements to the loan pooling and securitization process have shortened further the amount of time that mortgages are funded on warehouse lines..the average time that loans stay on the lines as collateral has fallen to only 14-15 days (from 18 days)...As long as this situation continues, the aging risk [and evaporation of investor outlets- similar to COVID-19 circumstances] that contributed to the collapse of warehouse lending in the private-label securities market during the financial crisis appears less likely....when faced with adverse [stressed] market conditions, or risk of breaking covenants and/or cross-default clauses, those IMBs with multiple line are at risk of their warehouse banks competing for seizing collateral, essentially accelerating the cease of business operations to the IMB...providing confidence remains in both the liquidity implied by GSEs as well as speed and reliability of securitization markets, then non-bank mortgage lending and liquidity risks will be mitigated. This means that housing finance reform must maintain a structure where investors on the secondary market can also maintain confidence in securities performance, or at the very least, assurances or guarantees of stability during times of stress and rises in potential mortgage default. Without such confidence, nor ability for Warehouse Banks to maintain profits at low relative risk [a growing concern with the emergence of eClosings/eNotes and the further commoditization of warehouse lending], the total number of credit facilities available to IMBs is at further risk with speculation that some will leave warehouse lending altogether.
MBA Coronavirus (COVID-19) GSE Eligibility Requirements for Purchase and Refinance Transactions following Forbearance
• Flow chart provides general guidance (quick look) for lenders when borrowers who previously entered into forbearance, seek new loan (purchase or refinance). - Happy path for borrowers that remained current or are reinstated current- no wait period. - If entered Loss Mitigation, then borrower could become eligible after making three consecutive timely payments, or completing loss mit, or repayment of loan; whichever comes first. - Examples of Loss Mit: • Repayment Plan • Payment Deferral • Loan Modification • Other o GSE's extended temporary flex policies (e.g. FNMA LL 2020-03, last updated Aug 27) to allow for applications through Sept 30, 2020