A January 8th Wall Street Journal editorial, “The States of Foreclosure,” which
discusses the comparative timelines among judicial and non-judicial foreclosure
states using MBA data, makes a very persuasive argument that state foreclosure
reform bills and mortgage servicing bills – which frustrate legitimate efforts
to move in a reasonable time and fashion toward foreclosure – will undermine
the housing recoveries in the states of implementation. With the Consumer
Financial Protection Bureau (CFPB)  issuing final, comprehensive servicing
rules in the next two weeks, please remind state policymakers to provide ample
time for these CFPB reforms to be enacted before rushing to enact new state
laws and regulatory requirements. Legislating state-level changes on top of
these impending, strong federal rules will create uncertainty and instability
for the mortgage markets of these states, and will reduce credit opportunity
for credit-worthy borrowers.

This message is brought to
you by the Mortgage Bankers Association (MBA)

Mortgage Bankers Association 1717 Rhode Island Avenue, NW
Washington, DC 20036
(800) 793-6222

On November 29, MBA reiterated its strong opposition to use of increased Fannie Mae and Freddie Mac guarantee fees to fund legislation unrelated to housing. MBA sent a letter to House leadership opposing the use of g-fees to fund H.R. 6429, an immigration bill that would provide visas for qualified workers in the fields of science, technology, engineering and mathematics (STEM).

MBA also joined other housing trades in sending a joint letter (please see second half of the above attachment) opposing the increase, while the Mortgage Action Alliance issued a Call to Action urging its members to contact their members of Congress to oppose the increase.

MBA Responds to State-Level G-Fee Pricing

On November 26, MBA submitted a comment letter responding to the announcement by the Federal Housing Finance Agency that it would impose an additional charge on mortgages originated in states where foreclosure costs were substantially above the national average.

This charge, which ranges from 15 to 30 basis points based on the state, is intended to reflect the additional costs incurred by Fannie Mae and Freddie Mac when foreclosure proceedings become necessary in these states. MBA requested additional transparency in the pricing model used to determine the fee to be assessed, and recommended a corresponding incentive for those states with less costly foreclosure regimes.

MBA also highlighted the consumer impact of the charge and thanked FHFA for including flexibility with respect to how the charge is financed. Finally, MBA pointed out that the announcement did not address servicer costs, and that the format of the charge varied slightly from the format of other loan-level price adjustments, which could potentially create confusion as originators incorporate the charge into their business practices.

MBA, State MBAs Call for Adoption of CSBS Uniform State Test for Mortgage Loan Officers

Over the past two weeks, MBA has been working with state MBAs nationwide to urge adoption of the Uniform State Test being developed by the Conference of State Bank Supervisors for the licensing of state-regulated mortgage loan officers.

The UST will streamline the pre-licensing testing requirement for loan officer qualifications for states that choose to implement it. So far, 29 states have signaled their intent to CSBS to adopt; these states will be announcing their plans in January and the UST will consequently be available for implementation by states in April 2013.

In its campaign for further state adoption, MBA is providing draft correspondence to state MBAs to submit to their state mortgage banking regulator, along with a memorandum of support to attach from MBA President and CEO David Stevens. In states without an MBA, a letter has been sent directly from MBA to the state mortgage banking regulator. As of today, state MBAs in California, Florida, Maryland, Massachusetts, Maryland, Michigan, North and South Carolina, Ohio and Texas have expressed their support to MBA for the UST and are contacting their state banking regulators; many more state MBAs have articulated their interest and are beginning the process of joining in the campaign.

If you would like to use MBA’s draft letter for state MBAs to write your own letter of support, please click here.
MBA President and CEO Speaks to the Center for American Progress on FHA

On November 30, MBA President & CEO David Stevens participated in an event at the Center for American Progress, Putting the FHA’s Financial Problems in Perspective. 

Following a keynote address from acting FHA Commissioner Carol Galante, Stevens participated in a panel discussion, moderated by Nick Timiraos of the Wall Street Journal, that included Roberto Quercia, director at the University of North Carolina Center for Community Capital; Joseph Tracy, senior advisor to the president at the Federal Reserve Bank of New York; Susan Wachter, professor of financial management at The Wharton School; and Sarah Rosen Wartell, president of The Urban Institute.

MBA Highlights Concerns of Independent Mortgage Bankers at CSBS Policy Committee Fly-In

On November 29, MBA staff met with the 11 members of the Conference of State Bank Supervisors Policy Committee, which included regulators from five states and representatives from state regulatory groups, including the American Association of Residential Mortgage Regulators.

The Policy Committee plays an instrumental role in the development of CSBS actions, which influence state regulatory matters nationwide. The conversation was not only an opportunity to express MBA’s support for the Uniform State Test being developed for mortgage loan officers employed at state-regulated lenders, but it was also a forum for MBA to present several issues of concern beyond the inconsistent regulatory landscape that exists for small and independent mortgage bankers.

Among the issues raised by MBA was the inconsistent application by states of licensing requirements for servicing personal generally, and loan modification staff in particular. MBA also voiced its view that it is inappropriate to expand the use of the National Mortgage Licensing Service to apply to pawn brokers and pay day lenders. MBA will continue to present these and other concerns to state regulators, and to raise these issues in other forums to advocate for small and independent members of MBA.

MBA Updates ALEC Conference on SAFE Act and Loan Officer Licensing

On November 28, MBA staff made a presentation to the American Legislative Exchange Council’s Financial Services Subcommittee on the regulatory impact of Dodd-Frank and the unintended consequences of the Secure and Fair Enforcement for Mortgage Licensing Act with respect to state licensing of mortgage loan officers.

The presentation–which took place at ALEC’s 2012 States and Nation Policy Summit in Washington, D.C. –highlighted the need for certainty in the mortgage markets as well as the need for common standards in regulations and consumer protections amidst the many rulemakings affecting the real estate finance industry. MBA highlighted the need for states to consider the totality of the regulatory environment being faced by small and independent mortgage bankers before legislating new requirements and burdens.

With respect to the need for common standards in loan officer licensing, MBA called on Subcommittee members to urge their states’ banking regulators to adopt the Uniform State Test for mortgage loan officers being developed by the Conference of State Bank Supervisors.

Fear of making bad loans and regulatory uncertainty are forcing lenders to restrict credit to all but the best borrowers, according to the head of the Mortgage Bankers Association.

MBA president and chief executive David Stevens told a consumer group Friday that bank executives and boards are telling their mortgage units, “Don’t make any bad loans. We don’t want to see our name in the headlines again.”

At the same time, the residential finance industry is facing implementation of a whole new regulatory regime. Pending rules—many of which will be decided in the months ahead—will impact disclosures, originations, loan officer compensation, servicing, appraisals and even capital requirements that likely will reshape the industry for years to come.

Right now, “lenders don’t know what the rules will be,” Stevens told the Consumer Federation of America. He noted that mortgage firms are compensating for the uncertainty by carefully reviewing and checking every loan, passing on extra operational costs to borrowers.

And while borrowers generally face tight lending standards, this is not the case with the HARP refinancing program. Under the Home Affordable Refinance Program, Fannie Mae and Freddie Mac have clearly spelled out the guidelines for refinancing borrowers with high LTV loans while reducing the lender’s risk of having to repurchase loans that go to into default.

As a result, funders are more willing to make HARP loans and the program has been a “success,” Stevens said.

The GSEs this week reported that mortgage companies have refinanced 709,000 loans through HARP since January with 300,000 having LTVs north of 105%.

The MBA president—a former FHA commissioner—stressed that the mortgage market will not function properly until there are clear rules of the road that protect everybody. This will allow consumers to borrow safely and mortgage firms to lend safely, he said.

Stevens expects most of the pending mortgage regulations to be in place by the end of 2013.

The Mortgage Bankers Association and other industry groups have lined up considerable legal talent to prevent and block any local community from invoking eminent domain to seize and restructure underwater mortgages.

Their attorneys have assured the industry that this unprecedented use of eminent domain raises multiple questions under the U.S. Constitution and state laws. And they could contest any seizure and keep the matter bottled up in the courts.

So far, only a few communities have embraced the concept of eminent domain promoted by Mortgage Resolution Partners LLC, a San Francisco residential finance firm.

Not one mortgage has been seized yet. But the industry is concerned that any seizure could poison the well. “What investor in their right mind would ever invest in a community that allows arbitrary writedowns of negative equity,” said MBA president and chief executive David Stevens.

“The lack of investment capital will have a direct and profound impact on every future homebuyer in that community,” he said last week at a MBA symposium on eminent domain.

To fight its battle, the industry has turned to Congress for help. Rep. John Campbell, R-Calif., has introduced a bill that would essentially cut off a community’s access to government-backed loans if local officials invoke eminent domain to seize mortgages.

It would be very difficult to get Congress to pass a bill like that. But it shows the lengths the industry will go to stop the use of eminent domain in the seizure of mortgages. Industry officials are seriously concerned eminent domain could undermine the mortgage finance system. And its use as proposed by Mortgage Resolution Partners strikes a vulnerable sector of the mortgage market: private-label mortgage-backed securities.

The pooling and servicing agreements in private-label MBS make it difficult to engage in principal reduction modifications and provide relief for homeowners who are still current on their mortgages.

Complicating the situation is the fact that Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks hold $145 billion in private-label MBS. Moody’s Investors Service recently estimated that wide-spread use of eminent domain could cause PLS investors to suffer immediate losses as high as 30%, according to an MBA letter addressed to the GSE regulator.

The Federal Housing Finance Agency has already served notice that it has “significant concerns” about eminent domain and revising existing contracts. In seeking public input on the issue, the FHFA said “resulting losses from such a program would represent a cost ultimately borne by the taxpayers” that could have a chilling effect on lenders and investors.

The eminent domain proposal advanced by Mortgage Resolution Partners calls for local governments to condemn underwater mortgages. Investors would then purchase mortgages and MRP would modify them through a principal reduction.

The new loans would meet Federal Housing Administration standards for a short refinancing so they could be pooled and sold via Ginnie Mae MBS.

Campbell said several bankrupt communities in his state have been tempted to use eminent domain to assist underwater borrowers. The congressman said his bill is intended to stop the promotion of these “abusive” proposals. “If they don’t stop, we will proceed with the bill,” the California congressman warned.

The Campbell bill would prohibit Fannie, Freddie, FHA and the Department of Veterans Affairs from insuring or guaranteeing newly originated single-family loans in counties that use eminent domain.

David H Stevens

President and CEO

Mortgage Bankers Association

July 11, 2012 02:54PM ET | Bloomberg

(Bloomberg) — The U.S. Consumer Financial Protection Bureau should give the strongest possible legal protection to mortgage lenders who follow key underwriting rules, according to lawmakers preparing a letter to the agency.

Representatives Shelley Moore Capito and Brad Sherman will send a letter to the CFPB on the so-called qualified mortgage rule later this week that calls for a strong standard, Capito said at a congressional hearing today in Washington.

“We must ensure that reforms do not increase the cost of mortgage credit and therefore restrict credit-worthy borrowers from receiving mortgage loans,” Capito, a West Virginia Republican, said during the hearing by a House Financial Services subcommittee. “If there is not sufficient legal certainty for these loans, the cost of credit for borrowers could rise as well as fewer mortgages being issued.”

So far, 90 lawmakers have signed the letter, of whom 13 are Democrats, Ben Fishel, a spokesman for Sherman, a California Democrat.

The regulation, which the bureau must issue by January 21, 2013, aims to discourage lenders from making home loans with risky features and outlining steps they must take to verify borrowers’ finances. Banks that follow the guidelines will gain protection against being held liable for borrower defaults.

The extent of that legal protection has divided both industry and consumer groups. The Federal Reserve, which proposed the initial rule in 2011 and then handed it off to the CFPB, has suggested two options: a “safe harbor” standard which offers complete protection from liability, or a “presumption” that loans issued according to quality standards were non-abusive. A presumptive standard could nonetheless be rebutted by a borrower or bondholder in court.

Credit Restricted

Some industry groups have argued that, without a safe harbor, lenders will pull back on lending for fear of provoking extensive litigation.

Debra Still, President and Chief Executive Officer of Pulte Mortgage, a lender headquartered in Englewood, Colorado, told lawmakers at the hearing that consumers harmed by a credit pullback could be among the most vulnerable.

“If this rule is not finalized appropriately, the impact will likely be worse for the very borrowers we are trying to protect and hinder the availability of credit for far too many borrowers who are otherwise qualified,” said Still, who is also chairwoman-elect of the Mortgage Bankers Association. “We will undoubtedly end up with a far more restrictive lending environment than we have today, and simultaneously harm the larger economy for years to come.”

Richard Cordray, director of the consumer bureau, said the agency wants to avoid the question “being punted into the courts.” He said it was less important which standard regulators pick than that it be written clearly.

“If you leave the standards vague and mushy, there’s not a lot of difference between the two,” Cordray said at a hearing on March 29.

To contact the reporter on this story: Carter Dougherty in Washington at cdougherty6@bloomberg.net

To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net