FEDERAL GOVERNMENT RELATIONS
Debt Ceiling Deal Clears House & Senate
President Biden and House Speaker Kevin McCarthy, R-Calif., reached an agreement to raise the debt ceiling ahead of a projected June 5 "x-date," at which point the federal government would be unable to service its outstanding debt.
The House voted 314-117 Wednesday night to approve the agreement to raise the debt ceiling. The deal struck by President Biden and Speaker McCarthy cleared the chamber with majorities in both parties voting in favor of the legislation.
The Senate voted 63-36 Thursday night in favor of the agreement. It now heads to President Biden to sign into law. The deal also contains provisions to limit government spending.
FHA Proposes New Tool for Struggling Homeowners
The Federal Housing Administration Wednesday announced it is seeking feedback on a proposal to allow mortgage servicers to use the FHA Partial Claim to both bring a borrower's mortgage current and provide temporary reductions for monthly mortgage payments for up to five years. The new option, the payment supplement partial claim, seeks to help struggling homeowners meet their mortgage obligations.
The rapid interest rate increases of the past year have limited the effectiveness of some of FHA's existing loss mitigation options in assisting borrowers, the agency said in a statement. FHA's widely used loan modification option, which has historically reduced borrowers' monthly payments to levels they can afford, is no longer as effective as it once was because borrowers are forced to modify at market rates that may be higher than their current rates.
The Payment Supplement Partial Claim allows homeowners experiencing a hardship who are unable to obtain a significant payment reduction with other loss mitigation options to keep their existing interest rate and temporarily reduce their monthly payment using funds from the FHA partial claim, which is a subordinate zero interest lien, the agency said. Repayment on the lien will not be required until maturity of the mortgage, sale or transfer of the property, payoff of the mortgage or termination of the FHA insurance. The deadline for submitting feedback on the proposal is June 30.
Fed Officials Hint June Rate-Hike Pause on the Horizon
Federal Reserve Governor Philip Jefferson said a rate pause at the next policy meeting would allow the Federal Open Market Committee to "see more data before making decisions about the extent of additional policy firming." Jefferson emphasized a pause should not be seen as an indication the Fed has reached the peak rate for the current tightening cycle. Philadelphia Fed President Patrick Harker shared similar thoughts, saying the committee should likely skip a June rate hike, but noting labor market data could change his mind.
Biden Administration Launches Fresh Effort Against 'Appraisal Bias'
Six federal regulatory agencies Thursday requested public comment on a proposed rule to regulate the credibility of algorithmic models used in real estate valuations, which is part of a larger effort by the Biden administration to address alleged bias in the appraisal process. The rule would require institutions that engage in covered transactions to adopt policies, practices, procedures and control systems to ensure that automated valuation models, or AVMs, adhere to quality control standards designed to safeguard the credibility and integrity of valuations, according to a joint statement.
"While advances in AVM technology and data availability have the potential to contribute to lower costs and reduce loan cycle times, it is important that institutions using AVMs take appropriate steps to ensure the credibility and integrity of their valuations," the agencies said. "It is also important that the AVMs institutions use adhere to quality control standards designed to comply with applicable nondiscrimination laws."
The proposed rule is one of several initiatives announced Thursday by the White House to address racial bias in home valuations. Others include regulatory guidance – still being drafted – on how financial institutions may integrate reconsiderations of value, or ROV, policies and controls into their current appraisal processes; a new working group to develop more consistent standards for the ROV processes of the Federal Housing Administration, Fannie Mae and Freddie Mac; a Federal Housing Finance Agency push to update appraisal data that is publicly available; and an online dashboard on barriers to entry in the appraisal profession.