General Session: Politics & Policy

Independent Mortgage Bankers Conference Hyatt Regency San Francisco

Bill Killmer Senior Vice President of Legislative and Political Affairs January 29, 2019

Washington Environmental Scan

• Policy/Political Landscape: Change continues – POTUS – 2018 Midterm Elections

The 115th Congress Composition: The 116th Congress Composition: House Ratio: 235 GOP, 193 Democrat (7 House Ratio: 235 Democrat; 198 GOP vacancies) (2 vacancies) Senate Ratio – 51 GOP, 49 Democrats, Senate Ratio – 53 GOP, 47 Democrats, (2 Independents caucus with Democrats (Martha McSally (R-AZ) appointed) - (R-AZ) appointed)

• Ongoing necessity to connect with, educate, and persuade policy makers View From – Key Players Shifting Speaker Pelosi’s favorability at decade high following the government shutdown

Americans’ views of Nancy Pelosi

GALLUP, JAN 2003 – DEC 2018

■ % favorable ■ % unfavorable

70

60

48 50

38 40

30 23 20 18 10

0 Shutdown Effect

6 Recent/Pending Legislative Activity – Lookback & Outlook

 Issues Driven by Industry Needs Tax Reform – TCJA – Real Estate Provisions – Bullets Dodged Regulatory Relief  Bipartisan Crapo bill (S. 2155, now PL 115-174) – Mortgage title & key provisions addressing MLO “transitional authority,” QM, TRID, HMDA, PACE, credit score competition, VA IRRRLs GSE Issues  Congressional stalemate – Hensarling/Delaney discussion draft – wait for Administration. New FHFA Director?  Administration – key principles, ? Actions to provoke the Congress or shrink the housing footprint? White House (NEC), Treasury, OMB, FHFA, HUD – who’s leading the charge? FHA Improvements – possible QC/IT upgrades? $20M? Administrative fee?

7  Issues dictated by external political and economic environment (and the weather…)

 Treasury/IRS implementation of operational provisions (pass- through entities versus hard C Corps)

 Budget & Appropriations – Shutdown – keeping the government up and running – HUD/FHA funding

 Disaster Assistance and Recovery Other Efforts: • Flood Insurance (NFIP expires at end of May)

• CFPB Guidance– “Rule on Rules”

• VA IRRRLs – Ginnie securitization/pooling

• Appendix Q – Self Employed/Mortgage Access

• FHLB Access

• New Priorities:

o Big Data/Consumer Data/Federal Preemption?

o Cybersecurity/Data Breach??

o Fin Tech/BlockChain? Regulatory Landscape Changing of the Regulatory Guard

President Trump’s Overhaul of Financial Regulatory Leaders since January 2017:

• OCC – Joseph Otting is Comptroller; SEC – Jay Clayton is Chair; FDIC – Jelena McWilliams is Chair

• Fed – Jay Powell is Chairman – clashing with POTUS?

• CFPB – Kathy Kraninger confirmed late last year – LO Comp (among other items)

• FHFA – Director Watt’s term expired; Otting to Calabria

• FHA – Brian Montgomery is Commissioner/Ass’t Secretary for Housing – now also Acting Deputy Secretary

Clear emphasis on “right sizing” gov’t regulation/balancing it with needs of an efficient marketplace FHFA – Potential Impact of Change in Leadership

Director Watt’s term expired in January 2019, which could result in efforts to:

• “Crowd-In” private capital via higher g-fees and/or LLPAs

• Decision to suspend contributions to the Housing Trust Fund – Dem hot button

• “Administrative” GSE Reform – If legislative reform falters, what will this look like? HUD – Potential Impact of New Leadership

Brian Montgomery’s leadership could result in efforts to:

• Change the FHA Loan-Level and Annual Certifications to reduce unwarranted liability under the False Claims Act

• Encourage more robust participation in the FHA single-family program

• Improve FHA single-family servicing requirements

• Improve FHA single-family technology

• Focus on market share versus loan quality? 116th Congress Political Dynamics & 2020 Outlook The Progressive Caucus and New Democrat Coalition have both increased their ranks by 10% or higher between 2010 and 2018 elections

Share of Democratic members in the ____ caucus FIVETHIRTYEIGHT, DATA AS OF DEC. 20, 2018 Women will comprise almost a quarter of Congress, with 24 women in the Senate and 102 in the House

Women in Congress, by party

Women Democrats (Total: 106) Women Republicans (Total: 21)

The 116th Senate: 17 D and 8 R The 116th House: 89 D and 13 R Senate: Democrats, Republicans will take turns playing defense in upcoming elections

Senate seats in play, by election year ■ Republican seats ■ Democrat seats

26

22* 22

12 12

9

2018 2020 2022 Source: The Cook Political Report, 2017. *includes special election to fill McCain seat currently held by Sen. Jon Kyl (R-AZ) 22 Republican and 12 Democratic Senate incumbents will face re-election in 2020

2020 Senate race ratings COOK POLITICAL REPORT ■ Solid D ■ Likely D ■ Lean D ■ Lean R ■ Likely R ■ Solid R ■ Not up for re-election

WA ME MT ND VT

OR MN NH ID SD WI NY WY MI IA PA NE NV MA OH UT IL IN RI CA CO WV KS MO VA KY CT NC TN NJ AZ OK NM AR SC DE MS AL GA MD TX AK LA DC

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