California MBA

18Aug

California MBA Statement on New FHFA Fee

August 18, 2020 California MBA

Today, the California MBA released the following statement regarding the FHFA’s announced new 0.5% fee on GSE refinances:

Last week the Federal Housing Finance Agency (FHFA) launched an attack on consumers, homeowners, lenders, and the entire housing and mortgage markets. The announced imposition of a new 0.5% fee on all GSE refinance transactions is an unwarranted, opportunistic, ill-timed, and potentially devastating blow to one of the few economic sectors that has helped support the U.S. economy during the unprecedented health and fiscal crisis we currently face. Adding an average of $1,400 (based on $280,000 loan) to each refinanced loan will certainly boost the coffers of Fannie Mae and Freddie Mac, but hurts homeowners and lenders with no clear indication that the fee will offset any purported risk to GSE portfolios. In fact, that the fee only targets refinance activity (which, thanks to lower rates and the fact that homeowners must be current on their loans to refinance will serve to make the loans more safe) clearly demonstrate that FHFA’s priorities are misplaced and that the fee should be withdrawn immediately.

In California, the situation is compounded with proposals currently moving through our State Legislature. AB 1436 (Chiu) includes many of the same provisions of AB 2501 (Limon), which was soundly defeated in June. Those include extensive forbearance provisions and punitive penalties for missing any provisions of the bill’s implementation, if passed.

“If the California housing market adds the effects of a bill such as this, it will likely lead to significant limits on the access to affordable mortgage credit for California borrowers by disrupting the securitization market that provides needed liquidity for the mortgage market and otherwise discouraging new mortgage lending in the state. Our state already has the most acute housing affordability challenges in the nation, and this bill will exacerbate, not help, that problem,” said Bill Lowman, President and CEO of American Pacific Mortgage and Chairman of the Board of Directors for the California Mortgage Bankers Association.

The California MBA stands with the countless business and consumer groups that have also spoken out against this irresponsible action, and we urge FHFA Director Calabria to immediately reverse this erroneous decision and protect access to affordable credit for all consumers. Working to recapitalize the GSEs and remove them from conservatorship is a laudable goal, but it must not come at the expense of the American people during a once-in-a-century health and economic disaster.

16Mar

SB 1447 Seeks to Expand California’s HOBR to Include Non-Owner Occupied Rental Properties

March 16, 2018 California MBA

In 2013, California’s Legislature enacted groundbreaking support for borrowers on owner-occupied properties who could not afford their mortgage payments. The Homeowner Bill of Rights or HOBR, as it became known, included several borrower protections that have become common place throughout the mortgage industry. HOBR’s key protections include: (1) a requirement that, prior to recording a Notice of Default, the loan servicer attempt to contact the borrower to discuss foreclosure prevention alternatives, such as a loan modification; and (2) banned the practice of dual tracking after a complete loan modification application is received, i.e., the loan servicer must put the foreclosure on hold while reviewing that application. Legislators intentionally limited HOBR’s application to owner-occupied properties, excluding second homes, commercial units and rental properties. Despite abuses by borrowers and their attorneys, HOBR has primarily accomplished its goal of connecting borrowers and their loan servicers to discuss options to avoid foreclosure. Senate Bill 1447 hopes to extend HOBR’s protections to owners of one to four unit residential properties, where the tenants have been unable to pay rent as a result of COVID-19. If passed, loan servicers will have to apply similar procedures to applicable rental properties as they currently do on single family owner-occupied properties. If that were all that was required, SB 1447 would probably not disrupt the loan servicing process. However, there are several holes in proposed language that must be closed.

For instance: • When is the Bill effective and will it apply to Notices of Default recorded prior to the statute’s enactment? • While the Bill requires that the owner have a bona fide lease and that the tenant’s ability to pay rent is impacted by COVID-19, there is presently no requirement that the lease be in writing, that the owner provide the servicer a copy of the lease or any evidence that the tenant is not paying rent as a result of COVID. The California Mortgage Association (“CMA”) has proposed amendments to address each of these issues. • The Bill currently only applies to “individual” owners who own no more than three (3) residential properties, with no more than four (4) units each. This language needs to be clarified to only apply to individual “borrowers”, not their successors. In addition, the CMA proposed language that would require borrowers to declare, under penalty of perjury, that they fall under this limit (otherwise, how would the servicer know), that the tenant has a bona fide lease and that the tenant is not paying rent due to COVID-19. • The Bill is intended to go through 2022, which seems excessive. As a result, the CMA has asked that it be reduced to run through 2021. While the CMA will undoubtedly not get everything it is asking for, we are optimistic that, as a result of the proposed amendments, the final language will be more palatable, less open to litigation and easier to implement. CMA’s advocates in Sacramento think that this bill is likely to pass in some form. While the CMA will undoubtedly not get everything it is asking for, we are optimistic that, as a result of the proposed amendments, the final language will be more palatable, less open to litigation and easier to implement.

Thanks, everyone. If you have any questions about SB 1447, HOBR or any proposed laws in California or the Western United States, please feel free to contact Robert Finlay at rfinlay@wrightlegal.net.