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Understanding and Preparing for Mortgage Regulation Changes in 2024

As we venture into Mortgage Regulation 2024, the trajectory of housing policy will be shaped by a renewed political appeal, focusing mainly on housing finance. The Biden administration is ready to highlight essential takeaways from the past year, turning proposed actions into concrete results. However, disagreements among political groups could escalate during federal budget discussions. To better understand the anticipated regulatory landscape in the mortgage industry in 2024, we connected with industry experts. Explore the key themes in housing policy and the specific initiatives with how it will affect borrowers.

Taxation, Budgeting, Congress, and Insurance

As we chart our course through the political terrain of the upcoming year, several uncertainties emerge regarding the potential for bipartisan agreement on the 2024 housing policy given the current legislative framework to prepare for mortgage regulation changes. This lack of unity could obstruct crucial actions, particularly in realms beyond fiscal discussions. Within the mortgage sector, the process of initiating loans could face turbulence due to:

  1. Unpredictability surrounding flood insurance.
  2. The need for uninterrupted federal services during negotiation periods.

The 2019 government shutdown established a precedent that led to the creation of state-level legislation advocating for automatic contingency plans in the event of future budget deadlocks. A recent report from Covius suggests a revival of such initiatives if a stalemate surfaces in 2024. Consequently, the push to enact federal laws in this context might gain momentum to how it will affect borrowers.

The 2024 housing and mortgage policy environment encapsulates several vital elements at the regional and local levels. These include escalating taxes and insurance costs in certain jurisdictions. Instances of property tax hikes, averaging a noteworthy 30%, surpass the historical mean of 10%, except in cases like Texas, where voters sanctioned a significant $18 billion property tax decrease.

One significant policy concern in 2024 centers around the funds lenders reserve in escrow for borrowers. This issue is under the spotlight as we await the Supreme Court’s ruling on a lawsuit involving Bank of America. The outcome will establish whether national depository laws take precedence over state-level directives.

The Federal Reserve and the Consumer Financial Protection Bureau

Navigating through the maze of policy alterations concerning interest rates and the Federal Reserve’s assortment of mortgage-backed securities emerges as a critical focus point. The advantages for lenders during an election year appear constrained, primarily due to the daunting prospect of relatively high mortgage rates posing challenges to loan initiation efforts to prepare for mortgage regulation changes.

Lenders are banking on the Federal Reserve’s support via its mortgage-backed securities portfolio. However, they predict this assistance would only materialize in a significant market disruption. Several apprehensions loom large, including:

  1. The impending regulations from the Consumer Financial Protection Bureau are anticipated to influence loan costs.
  2. The imminent Supreme Court decision regarding the CFPB’s authority holds immense significance.

An adverse ruling against the CFPB could send ripple effects across the sector, potentially impacting structures akin to independent directorships, as evidenced by the Federal Housing Finance Agency. Without regulatory checks and balances, the CFPB could exert its power to issue further Mortgage Regulation 2024 directives, especially amidst the pressures of an election year, potentially culminating in escalated regulatory measures within the housing and consumer finance arenas.

Looking ahead, we can anticipate fair lending initiatives that echo the 2023 advisory against discriminatory practices based on immigration status, reflecting actions taken by the Consumer Financial Protection Bureau and the Department of Justice.

Guidelines for Evolving Technologies

In the sphere of fair lending, the Consumer Financial Protection Bureau (CFPB) will likely turn its attention to the intersection of artificial intelligence (AI) and automated valuation models. Prepare for mortgage regulation changes in these terms.

Mortgage institutions must remain alert regarding steps to strengthen data security, especially with a significant amendment to an FTC rule due for enforcement in the coming year, which requires non bank entities to report incidents affecting 500 or more customers. The course of technology policy is set to boost electronic home-equity lines of credit (e-HELOCs), especially in the current environment of high-interest rates and home prices. 

The complexities involved in launching e-HELOCs, particularly the lack of electronic promissory notes, calls for enhanced regulatory and information technology structures to enable broad adoption. The Uniform Law Commission, through its implementation of Article 13 and the revised Article 9, assigns states the task of setting standards for the digital transferability of assets. 

This framework plays a critical role in maintaining liquidity in the secondary market for e-HELOCs, highlighting the importance of tracking developments as more states roll out their regulatory structures and prepare for mortgage regulation changes.

Pricing, Credit, and Federal Home Loan Banks

Prepare for mortgage regulation changes in rules related to asset trading, especially regulations set by significant government-affiliated buyers active in the secondary market, as guided by the Federal Housing Finance Agency (FHFA). The FHFA is examining loan pricing and plans to increase transparency, drawing from feedback collected during its request for insights into the pricing methodology. 

This is in line with the overall regulatory capital structure of government-sponsored enterprises. While the idea of these enterprises breaking away from government conservatorship seems far-off, the recent focus on the capital structure suggests ongoing consideration. The path toward implementing two revised credit scores and creating a combined credit report option is expected to progress in the next year. 

However, the FHFA emphasizes caution when changing credit standards that affect mortgage eligibility. The discussion around the rules governing Federal Home Loan Banks, sparked by the depository crisis 2023, is likely to continue. Some desired Mortgage Regulation 2024 changes, like increasing funds for an affordable housing initiative, might require legislative approval. 

Organizations dependent on the system for liquidity should keep tabs on the reform’s effects on access and costs. The FHFA is investigating areas beyond collateral supporting advances, possibly linking access to the financial profiles of participating counterparts. While there are no reported issues with entering the Federal Home Loan Bank System, concerns remain about its role as a last-resort lender in future situations.

Public Administrations and Service Providers

Prepare for mortgage regulation changes in payment management policies, especially those offering “meaningful default servicing relief,” influenced by the upcoming direction of Federal Reserve policy. 

These changes are necessary for borrowers in financial trouble and Ginnie Mae issuers dealing with overdue loan limitations. Ginnie is ready to implement additional policy changes to address problems in the reverse mortgage sector. Without further policy interventions from organizations like FHA, VA, etc., servicers’ ability to provide significant payment relief to homeowners suffering long-term income losses is limited. 

The ongoing review of the FHA’s payment supplement partial claim program highlights a potential policy action in Mortgage Regulation 2024 to solve this issue. Expect changes in loss mitigation strategies from Ginnie, FHA, and VA, transitioning from temporary pandemic measures to lasting successors. The VA is preparing to introduce a successor to the expired partial-claim program, responding to consumer issues that arose in its absence in late 2022. 

The possibility of foreclosure held by servicers stands out as a significant change in Mortgage Regulation 2024, dependent on new VA policies. Also, stay aware of upcoming, stricter policies for servicers. Ginnie Mae’s nonbank risk-based capital rule, having significant implications for servicing assets, is expected to take effect by the end of 2024. 

The upcoming bank capital regulations and potential actions by the Consumer Financial Protection Bureau could put additional strain on servicing. Government agencies, including Ginnie, VA, and FHA, are expected to advance with origination and servicing policies next year. Efforts to revitalize underused programs, encourage greater use of down payment assistance for government entities, and policy updates on loan assumptions are likely developments.

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