By Rod Alba
The American Bankers Association continues its advocacy efforts on multiple issues that affect mortgage lending. Here is a rundown of important recent activities:
FHFA pauses GSE’s credit score transition
In response to industry feedback, the Federal Housing Finance Agency put a halt to its plans to replace the current FICO score model with the FICO 10T and VantageScore 4.0 credit score models and transition from requiring three credit reports for single-family home loans to two. ABA previously raised concerns about the Q4 2025 implementation date for the transition in light of the agency’s lack of transparency about its analysis of the new scoring models.
Effect on banks: Delaying any implementation of credit score transitions provides needed relief to lenders that recognized the high level of difficulty in switching entire underwriting systems to upgraded models. The announcement also allows more time for continued discussions with policymakers in the incoming administration. The American Bankers Association and four associations last year requested FHFA make public the analyses that drove the changes, saying greater transparency was needed to ensure a smooth transition to the new model. ABA had previously raised concerns with FHFA about the public comment process for the initial rule and urged the agency to provide more time for stakeholder feedback.
ABA requests additional relief for homeowners
ABA and several other groups sent letter urging the Federal Housing Agency to extend a set of loss mitigation options that were offered to borrowers during the COVID-19 pandemic. Currently, the expiration date for these measures is April 30.
Effect on banks: Last year, FHA issued a proposal that creates a durable loss mitigation waterfall that provides borrowers and mortgage servicers with effective tools to assist distressed borrowers in any market environment, regardless of the borrower’s financial hardship. ABA supported the idea of a permanent loss mitigation waterfall that appropriately balances the shared interests of borrowers and servicers while respecting FHA’s statutory obligation to protect the Insurance Fund. While the proposal thoughtfully considered the lessons learned from the COVID-19 pandemic, ABA and allies asked FHA to make additional improvements to its proposed guidance before mortgage servicers adjust their operations ahead of a mandatory compliance deadlines. The letter and accompanying attachment include the associations’ complete list of comments and recommendations.
CFPB issues rule that applies TILA to PACE loans
In December, the Consumer Financial Protection Bureau finalized a rule that applies the Truth in Lending Act’s ability-to-repay requirements and civil liability provisions to residential property assessed clean energy loans, or PACE loans.
Effect on banks: As ABA has advocated, the CFPB finalized a rule to apply the Truth in Lending Act’s ability-to-repay requirements and civil liability provisions to residential property assessed clean energy, or PACE, loans. ABA has long held that these loans are “consumer credit” and therefore should be subject to Regulation Z. ABA has insisted that because residential PACE loans are recorded as tax liens that are not readily reported to lenders or servicers, it remains difficult for a lender or servicer to know of the placement of those liens on properties. The association encouraged the bureau to work with state and local recordation officials to determine if a solution involving additional disclosures or borrower education could be undertaken at a later date.
ABA issues updated Blueprint for Growth
As we welcome a new Congress and a new administration this month, ABA has released its 2025 Blueprint for Growth, outlining the advocacy agenda we will pursue on behalf of the nation’s banks. The blueprint addresses support for affordable housing initiatives, resetting the conversation around rational bank regulation in Washington and continuing ABA’s work to promote credit access and economic prosperity for all Americans.
Rod Alba is ABA’s SVP for real estate finance.
