MBA sees benefits, shortcomings in FHFA’s new ERCF rule

The Mortgage Bankers Association (MBA) this week appeared to relay caution to its members about the announcement from the Federal Housing Finance Agency (FHFA) last week that it had published a new, final rule on the Enterprise Regulatory Capital Framework (ERCF) related to commingled securities.

“The final rule includes modifications of certain provisions of the ERCF related to guarantees on commingled securities, multifamily mortgage exposures secured by properties with government subsidies, and derivatives and cleared transactions,” MBA said in its Nov. 27 advocacy update.

“Notably, in light of the delayed implementation date for the bi-merge credit report requirement and the ongoing public engagement related to credit scores, the final rule does not adopt the proposed changes to representative credit score calculations.”

Earlier this year, MBA had submitted formal comments to FHFA urging the agency to delay the implementation of the final rule, further adding that there are shortcomings to the rule as published this month.

In May, the MBA described itself as “generally supportive” of most amendments in the proposal, but noted concern about the proposal’s “changes to representative credit score calculations.” It urged the FHFA to consider “reducing the risk surcharge on third-party originated loans and the inclusion of a multifamily countercyclical adjustment.”

In terms of the newly-published final rule, MBA provided similar language about what it believes the new rule does and doesn’t address.

“The capital rule continues to be used as a tool to manage the GSEs’ risk, which has been evident in recent policy decisions,” the MBA said. “The final rule contains important amendments reflecting previous issues highlighted by MBA, such as the risk weighting for commingled securities, and a large reduction in the UMBS commingling fee.”

However, other “longstanding issues” — including disparities in third-party origination pricing or “the inclusion of a multifamily countercyclical adjustment” — are not addressed in the final rule.

The majority of the final rule is effective as of Jan. 1, 2024, but elements related to cleared and derivative transactions don’t go into effect until Jan. 1, 2026. The association will continue to engage with FHFA on these issues, the update explained.

“MBA will remain engaged with FHFA on issues related to the ERCF and will continue to advocate for changes that more accurately capture the risks posed to the GSEs, promote safety and soundness, and maintain a level playing field,” the update said.

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