MBA urges overhaul of mortgage rules in letter to OMB

The Mortgage Bankers Association (MBA) submitted a formal request to the White House Office of Management and Budget (OMB) on Monday, asking for the rescission of six rules and revisions to nine others that affect the mortgage industry.

These include regulations tied to servicing, the Real Estate Settlement Procedures Act (RESPA) and loan officer compensation, among others.  

“Overall, MBA supports the rulemaking process when it is used to provide clear rules of the road through a stable and informed process,” wrote Peter Mills, MBA’s senior vice president of residential policy and strategic industry engagement.

“However, agencies have occasionally promulgated rules that exceed their statutory authority and unnecessarily create significant costs or liability that affects credit availability.”

The letter is a response to a request by the OMB for comments about deregulatory efforts. Some of the rules targeted by the MBA have already been addressed under the Trump administration.

For instance, on April 11, the Consumer Financial Protection Bureau (CFPB) froze its rule requiring nonbank financial services providers to register certain enforcement actions and court orders in a new federal database. The mortgage industry opposed the rule because the data is already captured through the Nationwide Multistate Licensing System (NMLS).

The CFPB will also no longer prioritize enforcement of Section 1071 small-business loan data collection requirements, a 2023 rule that has been challenged in court. The MBA said the bureau overreached on its Dodd-Frank mandate by including loans for income-producing investment properties, which fall outside the intent to protect small businesses.  

Proposed changes at HUD

The MBA is also targeting several rules issued by the U.S. Department of Housing and Urban Development (HUD).

It is calling for the rescission of regulations on energy efficiency standards for new construction and floodplain/wetlands management, citing increased costs to the industry. The trade group also opposes HUD’s reinstatement of the “disparate impact” rule under the Fair Housing Act, arguing that it raises undue liability concerns.

Additionally, the MBA is pushing for expedited revisions to the Federal Housing Administration (FHA)’s claims curtailment policies. It said these changes are overdue as the policies contribute significantly to the higher cost of servicing nonperforming FHA loans in comparison to other portfolios.

On the servicing front, the MBA wants HUD to rescind a rule that modernizes borrower engagement in default situations, claiming it maintains duplicative requirements that HUD previously deemed unnecessary.

The group is also asking the CFPB to revise RESPA (Regulation X) servicing rules to streamline loss-mitigation procedures and update RESPA Section 8 in light of technological advancements.

Meanwhile, the U.S. Department of Veterans Affairs (VA) is being urged to remove the requirement for face-to-face borrower interviews. The MBA believes this places a logistical and compliance burden on servicers — especially those that work with rural borrowers.

Revising LO compensation

The MBA also called for a review of the Loan Originator Compensation Rule (Regulation Z), arguing that the regulation is overly complex and does not reflect current market realities. It also works to the detriment of consumers.

Kris Kully, a partner at Mayer Brown, said the Trump administration may offer an opportunity to revisit the rule.

“After we wait a bit until things settle down at the CFPB, there’s a chance that the industry could take some of the complaints that we’ve had about the LO comp rule and see if they might be more willing to examine,” Kully said. 

She noted two key industry concerns. First is the restriction on paying loan officers less for loans through Housing Finance Agency programs, which often result in losses due to stringent requirements.

Second is the CFPB’s stance against lowering compensation in response to competitive offers, which Kully described as potentially pro-consumer.

“Historically, the CFPB has said that this kind of price competition is inconsistent with the rule. Whether they will prioritize this remains to be seen, but it’s something the industry is likely to revisit.”

The MBA also urged the CFPB to amend Home Mortgage Disclosure Act (HMDA) rules to fully exempt business-to-business loans secured by multifamily properties.

The Federal Housing Finance Agency (FHFA) is being asked to exclude unfair or deceptive acts from lending and housing plans, and to reassess the Enterprise Regulatory Capital Framework (ERCF), which the MBA criticizes as opaque and overly complex.

Even the secondary market is included in the MBA’s requests. The trade group asked the Securities and Exchange Commission (SEC) to amend Regulation AB II disclosure requirements as it seeks to revive the registered segment of the private-label securities market.