Some of the nation’s largest mortgage lenders have been removed from the field, including industry leaders like Washington Mutual, Indy Mac, and Wachovia.  All of the major Wall Street investment banks have either disappeared or converted to commercial banks, including Bear Stearns, Lehman Brothers, Merrill Lynch, Morgan Stanley and Goldman Sachs.  Finally, Fannie Mae and Freddie Mac have been placed into conservatorship with major questions looming over their futures.

The housing crisis has morphed into a full-blown global crisis, threatening to produce economic dislocation not seen since the Great Depression.  In world capitals and Washington D.C., policymakers have often resorted to highly interventionist approaches in search of solutions.  The U.S. Congress passed three major bills this year dedicated to addressing the financial crisis and the Federal Reserve and Treasury threw away their playbooks and adopted a host of untested policies.

Throughout this tumult, MBA maintained a strong and visible presence as an advocate for the mortgage industry.  Some of MBA’s longest-standing advocacy priorities were passed into law.  In a normal year, we would have taken our victory lap and settled into identifying new long-term goals.  In this environment, we realize that it’s a race against the clock as we work with our members and other stakeholders to find bold and innovative solutions to stabilize the markets and help distressed borrowers.   

Looking ahead, our industry faces some daunting challenges as Congress and others will call on us to do more for borrowers.  We will also be asked to explain how this crisis occurred…and to be accountable for any necessary changes to prevent it from happening again.  In the coming policy debates, we will also have some valuable opportunities to re-brand our industry and put into place more rational and sustainable business practices.  Of course, the debates are likely to be intense and even acrimonious at times and their outcome is uncertain.  Our goal will be to ensure that your perspective is heard and considered throughout this process.

Happy holidays and thank you for your continued support of MBA’s advocacy efforts.

Accomplishments Overview

In 2008, MBA testified 16 times – 15 times before committees of the U.S. Congress and once before the New York Senate.  MBA wrote either independently or with other groups, 50 letters to legislators and 55 regulatory comment letters, all of which can be viewed on MBA’s Web page for testimony, comment letters and letters to legislators.

Federal Update

This year, the pace of regulatory and legislative developments that affected the real estate finance industry was extraordinary, but MBA’s presence remained ubiquitous.  MBA secured many important victories in 2008:  

Loan Limit Increases

As the U.S. economy began to dip dramatically in early 2008, Congressional leaders and the White House moved with unprecedented speed to reach agreement on a $168 billion economic stimulus package. As a part of the stimulus package, the government-sponsored enterprise (GSE) and Federal Housing Administration (FHA) maximum loan limits were temporarily increased to $729,750 in high-cost areas.  MBA strongly supported these loan limit increases. Unfortunately, these limits are due to be replaced with lower limits set by HERA (see below) on the first day of 2009. In 2009, MBA will work toward reinstating the higher FHA limits established in the economic stimulus act and enacting a new nationwide floor of $625,500 for GSE loans.

Major Housing Bill, FHA Modernization and GSE Reform

July 2008 brought passage of the most wide-sweeping housing legislation in a generation: The Housing and Economic Recovery Act or HERA. MBA was able to leverage Congress’ momentum to accomplish several long-standing MBA goals in HERA including FHA modernization, the reform of the oversight of the GSEs and allowing state housing finance agencies (HFAs) to use tax-free mortgage revenue bonds to fund refinance loans. The groundwork for these key victories was laid in hundreds of meetings, documents and public testimonies over much of the last decade as MBA persistently called for passage of FHA modernization and GSE reform.

Throughout 2008, MBA spent countless hours lobbying to improve other HERA provisions including the new homeownership tax credits and the National Licensing and Registration System for loan originators.  MBA was also deeply involved in discussions about the FHA rescue plan included in the bill -- the Hope for Homeowners Act -- which offers lenders another tool to help distressed borrowers stay in their homes.  Following passage of HERA, MBA launched the HERA Resource Center which serves as a one-stop shop for all developments related to this new law.

New Funding For and Focus on FHA

In many ways, 2008 was a banner year for FHA. As FHA market share increased, Congress finally delivered on MBA’s perennial request to modernize and better equip the agency. HERA allocated $25 million to HUD for FHA modernization to improve technology, processes, program performance, eliminate fraud and provide appropriate staffing. As discussed above, the legislation also increased the FHA loan limit and established the new Hope for Homeowners Program (H4H). MBA continues to work closely with FHA to ensure that the H4H program is as lender-friendly as possible. MBA’s FHA Resource Center now keeps members up-to-date on the most current information related to FHA.

Restructuring of the GSES and the Financial Markets

2008 may also be remembered as the year in which the GSEs failed and the secondary housing market was forever changed. When both GSEs were placed into conservatorship in September, sending the capital markets into completely uncharted territory, MBA convened a national forum of diverse leaders from government, academia and industry to: identify the causes of the secondary market’s failure; the essentials for a functioning secondary market; and the proper role and form of government activity in the secondary markets going forward. After the summit, MBA developed a white paper on Key Considerations for the Future of the Secondary Mortgage Market and the Government Sponsored Enterprises summarizing the discussions and making specific policy recommendations for the incoming Obama Administration and the 111^th Congress. This paper will be posted on MBA’s Web site shortly.

Bankruptcy Cram Down Avoided  

One of the most critical and hard-won battles in 2008 was the fight to keep bankruptcy cram down provisions out of three legislative proposals considered this year including HERA and the Emergency Economic Stabilization Act (EESA). By successfully stopping proposals to allow bankruptcy judges to unilaterally and retroactively alter the terms of a mortgage contract, MBA prevented further destabilization of the mortgage markets. 

As part of our efforts, MBA launched a Stop the Bankruptcy Cram Down Resource Center to educate lawmakers on the impact such legislation would have in their states and spent countless hours meeting with members of Congress and their staff as well as the Bush administration on this issue.  This Web site was cited in several media stories as an effective tool in the fight.  In addition, MBA sent a number of letters to Capitol Hill expressing its strong opposition to cram down, testified before a House Judiciary subcommittee and the Senate Judiciary Committee and worked closely with a coalition of groups to fight of these legislative proposals. 

While MBA was successful in preventing cram down legislation from passing in 2008, it appears that momentum is building to attach it to a “must-pass” economic stimulus package in early 2009.  MBA has already met with President-Elect Obama’s transition team staff and continues to educate member of Congress and their staff as we prepare to face this issue in the coming weeks.

Evolving Accounting Standards

MBA kept pace this year with an extraordinarily active Financial Accounting Standards Board (FASB), submitting close to a dozen comment letters to the FASB, the SEC, and bank regulators on proposed FAS amendments, Exposure Drafts and other accounting policy issues. Perhaps most critically, MBA worked throughout the year to raise awareness of the pro-cyclical impact of fair value accounting in an inactive market. In October, a FASB staff position paper amending FAS 157 revealed measured receptivity to MBA’s position on fair value, or mark-to-market, accounting. MBA continues to work with FASB and the SEC to encourage a larger re-evaluation of fair value accounting.

Foreclosure Prevention Efforts Intensified

Throughout 2008, MBA played a key role in helping the industry’s unprecedented efforts to assist financially troubled borrowers. The HOPE NOW Alliance, of which MBA is a founding member, helped avoid more than 2.2 million foreclosures through workouts and loan modifications in 2008 and expects to double that number in 2009. In February, MBA’s Chairman Kieran Quinn, CMB, testified on behalf of HOPE NOW before the House Financial Services Subcommittee on Financial Institutions & Consumer Credit.  In February, MBA, the National Black Church Initiative (NBCI) and Fannie Mae released a user-friendly Foreclosure Prevention Guide to help assist at-risk borrowers identify the resources available to help them keep their homes. In addition, MBA created a Foreclosure Prevention Resource Center Web site that provides troubled borrowers with valuable information, including local foreclosure workshops and access to credit counselors.

MBA has also been active on several other loss mitigation efforts. In 2008, MBA participated in a number of Congressional briefings on the industry’s loss mitigation efforts, worked with HUD to expand the FHASecure program and improve the H4H program and assisted members of Congress in organizing a number of foreclosure prevention seminars back in their states or Congressional districts. MBA continues to be in contact with President-elect Obama’s Transition Team, members of Congress and a number of other groups as we look to improve on our efforts to keep troubled borrowers in their homes.  Helping prevent foreclosures will be a top priority for the Obama administration and the new Congress.

Market Stabilization Efforts Continued

The constant turmoil in the financial services arena prompted a variety of proposals from Congress, government regulators and the industry in 2008 to restore stability. MBA was engaged in the debates at all levels, ensuring that the issues of the real estate finance industry were clearly understood and carefully considered. The Emergency Economic Stabilization Act, passed in October, included several provisions intended to stabilize the economy such as an increase in the Financial Deposit Insurance Corporation (FDIC) guarantee on deposits, an extension of energy and other tax breaks, significant disaster relief for the summer storms and the establishment of the $700 billion Troubled Assets Relief Program (TARP.) Since October, MBA has remained in close discussions with both the current and future administration as the plans for TARP have evolved. MBA’s Financial Stability Resource Center tracks key initiatives regarding financial market stability and includes relevant MBA policy, actions and other helpful guidance.

Real Estate Mortgage Investment Conduit (REMIC) Reform

For five years, MBA has sought to modernize the tax treatment of REMICS for commercial and multifamily loans. In 2008, MBA was finally able to both submit written comments and present oral testimony to the IRS where MBA laid out the industry’s views on issues such as changes in collateral, guarantees or other forms of credit enhancement and changes in the recourse nature of a mortgage loan. The request for comment and hearing were in response to MBA’s work with the IRS and Treasury on this issue. The IRS has not yet issued the final rule.

Final Home Ownership Equity Protection Act (HOEPA) Rule

In July the Federal Reserve Board (FRB) released new HOEPA rules under the Truth and Lending Act (TILA).  MBA submitted extensive comments in April on the proposed rule, and met in May with the FRB governors and staff to discuss those comments. MBA held a live online conference in August to educate members on the new HOEPA requirements, which establish a new category of "higher-priced mortgage loans”, require earlier consumer disclosures and prohibit certain acts or practices for loans that meet HOEPA’s “higher priced” or “high cost” triggers.

Final Real Estate Settlement Procedures Act (RESPA) Rule

In November, HUD released its long-anticipated final RESPA rule which establishes, among other items: (1) a new standard three-page Good Faith Estimate (GFE) form, (2) a new HUD-1 and HUD-1A form, and (3) accompanying rules including tolerances to limit increases in settlement charges. Lenders are required to begin using the new forms as of January 1, 2010. MBA spearheaded industry efforts to weigh in on the rule before its release including several meetings with the Office of Management and Budget, the Small Business Administration and HUD staff. MBA Chairman David Kittle, CMB, testified twice in Congress about the rule and MBA submitted extensive industry comments on the proposed rulemaking. After HUD issued final rules in November, MBA published an interim summary of the rulemaking and hosted an online conference call to discuss the new RESPA requirements. MBA will continue to argue in 2009 that the new rule should be withdrawn, suspended or put “on hold” to assure that the RESPA revisions are coordinated with the Federal Reserve's efforts to reform consumer disclosures required by TILA.

Fair and Accurate Credit Transactions Act (FACTA)

MBA provided input on two occasions this year to the federal banking regulators and the Federal Trade Commission (FTC) on issues relating to the Fair and Accurate Credit Transactions Act (FACTA). In February, MBA submitted comments in response to proposed rules regarding the accuracy and integrity of information furnished to consumer reporting agencies under FACTA.  In August, MBA filed comments on the Federal Reserve Board and the FTC’s proposed risk-based pricing regulations under FACTA.

Three Major Policy Papers Released.  

MBA also retained its place as the thought leader on policy issues related to the real estate finance industry this year by releasing three important papers:

a)Mortgage Bankers and Mortgage Brokers: Distinct Businesses Warranting Distinct Regulation clarifies the differences between mortgage lenders and mortgage brokers, establishing why a "one size fits all" approach to regulating the residential mortgage industry makes no sense;

b)Lenders' Cost of Foreclosure  details the costs lenders incur during the foreclosure process; and

c) Key Considerations for the Future of the Secondary Mortgage Market and the Government Sponsored Enterprisessummarizes the discussions among industry, government and academic leaders at MBA’s November, 2008 Summit on Ensuring Liquidity in the Secondary Mortgage Market. This paper will be posted on MBA’s Web site shortly.

State Update

MBA’s State Advocacy Program worked diligently during 2008 to ensure that the mortgage industry’s voice was heard clearly among state legislators, regulators and other officials in all 50 states and D.C. This was accomplished via direct and grassroots advocacy with lawmakers, outreach to third party groups of legislators, regulators, governors and attorneys general, as well as through dialog and coordination with state MBAs and media outreach. 

Key Issues in 2008

Legislative initiatives concerning the mortgage lending industry moved very rapidly at the state level in 2008.  MBA focused its energy on four major issues in an effort to educate legislators and the media on industry positions: 

Foreclosure moratoria: Seven states introduced bills calling for a moratorium on foreclosures.  In both Minnesota and New York, MBA officials met with top lawmakers to educate them on the potential negative effects a foreclosure moratorium would have on consumers and the state economy.  In addition, the State Advocacy Program supported media outreach that included earned media (including the placement of opinion pieces in major newspapers) and an advertising campaign focused on defeating moratorium legislation.  As a result of MBA’s efforts, the foreclosure moratorium proposals in Minnesota and New York were defeated and, as of yet, no other state legislature has enacted a blanket foreclosure moratorium.

Subprime lending legislation: Fourteen states introduced bills that included onerous provisions relating to subprime or high-cost mortgage lending.  In these states, MBA used its resources to show legislators that nontraditional lending products are an acceptable loan vehicle and that many of these provisions would harm their states’ economies and dry up credit for many borrowers.  Many of these provisions were defeated, amended or improved due to MBA’s efforts via the State Advocacy Program.

Fraud against mortgage lenders: One of MBA’s goals on the national and state level has been passage of laws cracking down on mortgage fraud and foreclosure rescue scams.  With the goal of preserving the integrity of the industry, MBA advocated for the passage of legislation making fraud against mortgage lenders a distinct crime in four states.

Servicing issues: Several servicing issues surfaced in state legislation in 2008.  Among the issues considered were those related to loss mitigation, changes to the foreclosure process, individual servicer licensing, borrower notification and servicing data reporting requirements.  Because of the onerous burdens these provisions would have imposed on members, MBA engaged lawmakers in 13 states to amend, improve or defeat them.

Looking Ahead to 2009

In 2009, issues related to foreclosures, subprime lending and servicing will be at the top of most state legislators’ lists and MBA will continue to advocate for the industry in these states.  In order to continue the successes of 2008, the State Advocacy Program will again play a critical role in MBA’s overall legislative and media strategies as the industry continues its push for legislative policies that benefit lenders, borrowers and the economy at the state and local levels.  MBA will continue to keep a close eye on new state initiatives that may serve as the springboard for additional legislation at the federal level.

MBA’s Grassroots Program Continues to Build Momentum

MBA's grassroots program, the Mortgage Action Alliance (MAA), was extremely active during the 110^th Congress.  MAA now has over 13,340 members, easily surpassing its original goal of 10,000.  Through nearly 40 Calls-to-Action, MAA members communicated with elected officials almost 40,000 times in 2008.  Nine of these Calls-to-Action were on the local level, generating more than 7,000 communications in support of the industry's priorities to state policymakers. MAA has also released a new and improved Web site, with daily updates on the latest political/election news, links to the latest MBA advocacy news, and info on the most recent MAA enrollment campaigns. If you haven’t joined MAA, please take a moment to do so by clicking here.

MORPAC

2007- 2008 was a successful cycle for MORPAC, which raised over $1,191,574 for the 2007-2008 election cycle.  Even with the current market environment, MORPAC maintained the level of success from the previous cycle, collecting contributions from more than 2,517 individuals.  In 2007-2008, MORPAC disbursed over $1,132,158 to Members of Congress, candidates and political committees. For more information about MBA’s advocacy activities, please visit www.mortgagebankers.org/advocacy.