By Rod Alba
The American Bankers Association continues its advocacy efforts on multiple issues that affect mortgage lending and homeownership. Here is a rundown of important recent news and activities:
Bankers support mortgage reforms
The American Bankers Association recently welcomed two new executive orders from the White House directing federal regulators to roll back or better tailor mortgage regulations to expand access to credit and promote new housing construction.
The orders instruct the Consumer Financial Protection Bureau and bank regulators to reduce unnecessary regulatory burdens, promote competition among mortgage lenders, lower borrowing costs and better tailor mortgage rules for community banks. The mortgage-focused order appropriately recognizes that two decades of accumulated statutory and regulatory changes have driven up mortgage costs by sharply increasing the compliance burden associated with origination and servicing. These costs have not only raised prices for borrowers but have also contributed to a significant decline in bank participation in mortgage lending.
ABA strongly agrees with the executive orders’ assessment and will actively support the reviews and regulatory processes it directs. For years, ABA has cautioned that the post‑crisis expansion of highly complex and prescriptive rules — including the ability-to-repay and qualified mortgage framework, TILA-RESPA Integrated Disclosure requirements, enhanced servicing standards, and expanded Home Mortgage Disclosure Act reporting — has imposed substantial compliance and legal costs on all banks.
Community banks, in particular, often lack the scale and resources needed to absorb ongoing legal, audit and compliance expenses. ABA member banks report that compliance costs have generally grown faster than mortgage revenues at smaller institutions, forcing many banks to scale back or exit mortgage lending altogether.
ABA supports streamlining mortgage regulations and ensuring that they identify rules that impose unnecessary costs, risks and legal uncertainty without corresponding consumer benefit. The association also supports the cost-reducing principles articulated in the order and will advocate that federal agencies move promptly with targeted reviews to ensure the mortgage regulatory framework is understandable, fair, efficient and applied consistently across all communities.
Fannie, Freddie ease certain property insurance requirements
Fannie Mae and Freddie Mac are rolling back certain property insurance requirements for condominiums and single-family homes in response to “skyrocketing” insurance prices, the Federal Housing Finance Agency announced. Fannie and Freddie will now accept actual cash value coverage on roofs for single-family homes and condos, according to the FHFA. The rest of the house must have replacement cost value coverage, which usually has higher premiums but more extensive coverage.
ABA, in conjunction with Mortgage Bankers Association and Housing Policy Council, sent a joint letter to the Federal Housing Finance Agency in November 2024. In the letter, the associations urged FHFA to direct Fannie Mae and Freddie Mac to rescind difficult property insurance requirements introduced earlier that year. ABA argued that the new standards — specifically those regarding the verification of replacement cost value — created “significant operational, legal, and consumer protection challenges.”
In response to industry feedback and evolving market conditions, FHFA and the GSEs announced the following changes to property insurance requirements:
- Retracting the 2024 requirement for verifying a replacement cost value (a number) year over year and returning closer to the pre-2024 requirements. Under this new update, for new policies, servicers must confirm that insurer rating, deductibles and perils meet the selling guide requirements and confirm that replacement cost coverage is in place. The same requirements apply to renewal policies and must be done at least annually.
- Allowing actual cash value policies for roofs.
- Clarifications around the process servicers must take when initial evidence is insufficient to confirm replacement cost requirements.
- Clarifications around written procedures describing how servicers will meet the monitoring requirements, including processes for detecting coverage decreases and confirming compliance replacement cost coverage.
- New requirement that, at least annually, servicers must send the borrower a reminder that the borrower is responsible for maintaining insurance on the property and should contact their insurance provider to review coverage, which can be combined with another communication.
- Emphasizing that servicers must obtain lender-placed property insurance when notified that coverage is cancelled, non-renewed or lapsed.
ABA outlines national blueprint for fighting fraud.
ABA submitted a statement ahead of a meeting of the congressional Joint Economic Committee highlighting the many ways banks protect their customers from fraud and scams and pointing out where more support is needed — particularly from telecommunications and social media companies — in the fight against fraud.
CFPB reforms could come this year
House Financial Services Committee Chairman French Hill (R-Ark.) signaled that Republicans in the House are looking to put forth a series of bills to address structural reform of the CFPB. Hill also stated that he expects the 1071 final rule and initiation of a 1033 rulemaking by midyear.
ABA offers feedback on VA mortgage policy
A proposal for implementing a new “partial claim attestation” policy to help veterans and servicemembers pay their mortgages needs further revision in order to have the desired effect, ABA told the Department of Veterans Affairs. ABA offered several recommendations for the department to consider.
Rod Alba is ABA’s SVP of real estate finance.
