Weekly update from the National Housing Conference
In this issue
July 4, 2022
Issue 91-26

· NHC and Urban Institute host Catalysts for Change
· Freddie Mac to consider rental payments in underwriting
· CFPB affirms state role in fair credit reporting laws 
· HUD announces 2022 Secretary's Award winners
· Federal Reserve Board of Governors seeks CRA Analyst

· Chart of the week: Zillow May report shows affordability challenges
Housing affordability will continue to worsen

By Bill McBride and David M. Dworkin, NHC President and CEO

Housing affordability will continue to worsen through this year as inventory remains at historic lows. In fact, excluding the housing bubble of 2004-2008, it is the worst affordability since 1989. This time, there are two important differences that make the current trends somewhat unique. During the early 1980s, homes were unaffordable due to very high mortgage rates. During the housing bubble, toxic mortgages with teaser rates (usually around 1%) made houses seem more affordable. But when teaser rates reset to market levels, many of these mortgages failed because homeowners could not afford the actual cost of the mortgage. Today, soaring housing costs are driven by the compounding impact of underproduction between 2008 and 2020, housing supply chain failures since 2020, and increased demand since 2020.
Currently mortgage rates are close to 6.0% - so we already know the “Affordability Price Index” will increase further over the next couple of months (meaning houses are even less affordable).

It has been over 16 years since the bubble peak. In the most recent Case-Shiller release, the seasonally adjusted National Index (SA), was reported as being 63% above the bubble peak in 2006. However, in real terms, the National index (SA) is about 16% above the bubble peak (and historically there has been an upward slope to real house prices). 

People usually graph nominal house prices, but it is also important to look at prices in real terms (inflation-adjusted). As an example, if a house price was $200,000 in January 2000, the price would be over $330,000 today adjusted for inflation (65%). This graph shows the monthly Case-Shiller National Index SA, and the monthly Case-Shiller Composite 20 SA (through April) in nominal terms more...
News from Washington | By Luke Villalobos
NHC and Urban Institute host Catalysts for Change

The National Housing Conference and Urban Institute hosted Catalysts for Change: Reducing the Racial Homeownership Gap on Wednesday to close out homeownership month with forward-looking conversations on improving homeownership rates for people of color. The event featured keynote remarks from Alanna McCargo, president of Ginnie Mae, and comments from Chuck Bishop, Head of Diverse Segments for Home Lending at Wells Fargo. Panelists from the White House, fair housing organizations, real estate representatives, home builders, and more came together to offer their perspectives on expanding homeownership through aligning goals and practices. In her remarks, McCargo discussed the role of the Administration in understanding equity issues in housing to counter them adequately. She posed the challenge of bringing scalable equity into a massive housing financial and regulatory ecosystem.
 
"Lack of access is one of the critical drivers of lack of equity and lack of opportunity," said McCargo. "Making sure that we have a housing finance system that's accessible to all, to more people who are serving the people we are trying to reach in rural communities, in Tribal lands, in low- and moderate-income sectors, that is critical. The people doing that work are often CDFIs and small community banks, and the like. We have to find ways to get them access to the system."
 
The event featured a series of new Data Walk videos created by Urban Institute that illustrated in narrative form years of research on the barriers people of color face when trying to achieve homeownership. The topics included structural racism, household-level factors, property-level factors, neighborhood-level factors, and climate change. Two panels also convened to discuss federal interventions in homeownership disparities and align federal and local policy to address the racial homeownership gap. Finally, NHC President and CEO David Dworkin had a fireside chat with Washington, D.C. Mayor Muriel Bowser discussing her work in advancing housing equity in the District.
 
The hybrid-style event occurred at the National Press Club with a corresponding livestream. NHC thanks Wells Fargo for sponsoring the event and making these vital conversations possible. You can view a complete event recording on NHC's YouTube channel.
Freddie Mac to consider rental payments in underwriting

Freddie Mac announced on Wednesday that it would consider on-time rental payments as part of the company's loan purchase decisions. The functionality will begin on June 10, 2022, through Freddie Mac's automated underwriting system Loan Product Advisor®. In addition, borrowers can now permit Freddie to submit bank account data for 12 months demonstrating on-time payments for consideration in their assessment. A third-party service provider obtains the bank account data. Freddie Mac already uses the provider to verify assets, income, and employment. The change includes virtual payments through services like Zelle, Venmo, and PayPal. Later this month, Freddie Mac will announce additional requirements for submitting this data.
 
"This extremely important initiative will help many renters move closer to achieving the dream of homeownership," said Michael DeVito, CEO of Freddie Mac. "Millions of American adults lack a credit score or have limited credit history. By factoring in a borrower's responsible rent payment history into our automated underwriting system, we can help make home possible for more qualified renters, particularly in underserved communities."
 
Freddie joins Fannie Mae in rental payment consideration. Fannie announced in Aug. 2021 that it would consider on-time rental payments. Housing advocates have long encouraged the two government-sponsored enterprises to find ways to consider rental payments to reach otherwise credit-invisible potential homebuyers. The change can significantly impact racial inequities in homeownership by expanding homeownership opportunities to racial groups disproportionately represented in rental housing. 
CFPB affirms state role in fair credit reporting laws

The Consumer Financial Protection Bureau (CFPB) issued an interpretive rule on Wednesday that affirms states' abilities to protect residents through their own fair credit reporting laws. The interpretation makes clear that federal statute allows states to consider and enact laws that reflect local economies and residents. States can enact state-level laws that are stricter than the federal Fair Credit Reporting Act. This includes, for example, enacting protections for tenant screening reports against abuse and misuse of data that could impede access to housing.

"The legal interpretation issued today makes clear that federal law does not automatically hit delete on state data protections," said CFPB Director Rohit Chopra. Two things are evident in the rule. First, states retain broad authority to protect people from harm due to credit reporting issues. And secondly, state laws are not preempted unless they conflict with the Fair Credit Reporting Act or fall within narrow preemption categories enumerated within the statute.
HUD announces 2022 Secretary's Award winners

HUD announced the winners of the 2022 Secretary's Award for Public-Philanthropic Partnerships on Tuesday. Winners include Black Hills Area Community Foundation, Destination Home, Grand Haven Area Community Foundation, JPMorgan Chase Foundation, Red Lodge Area Community Foundation, San Francisco Foundation, and St. Croix Foundation for Community Development. The awards recognize excellence in partnerships that transform relationships between public and philanthropic relationships through economic development, health, safety, education, workforce development, disaster resilience, inclusivity and cultural opportunities, innovative regional approaches, and housing access for low- and moderate-income families.
Federal Reserve Board of Governors seeks CRA Analyst

The Federal Reserve Board of Governors is seeking a Supervisory Policy Analyst-Community Reinvestment Act (CRA) Analyst to join their team quickly. Interested applicants should submit their resumes and cover letters by mid-week. The position will work with the other banking agencies to review comment letters and develop the CRA final rule, will play a role in developing interagency examiner guidance and training materials, and will help address policy issues that arise after the rule is finalized. The Board wants to move quickly on potential candidates given the ongoing process of CRA modernization and has the potential to be a senior role depending on experience. 
Chart of the week
Zillow May Report shows affordability challenges

Zillow released its May mortgage market report showing rising costs of typical homes in the U.S. The report shows that mortgage payments are higher than rent in 45 of the 50 largest metros in the U.S., up from 22 in 2019. Despite these rising rents, rapidly rising mortgage costs still mean rent is cheaper in most places. Mortgage rates further shot up in early June, averaging 5.78%. That rate makes monthly mortgage payments at purchase $2,127, which is 51% higher than last year. 
What we're reading
An article in Fortune discussed the weakening housing market and the "blizzard of seemingly contradictory news" that forecasts the future of housing. The article quotes Ed Pinto, the American Enterprise Institute's Housing Center Director. It concludes that although the housing market is cooling rapidly, it is unlikely that we will see a 2008-style crash.
 
The Federal Reserve Bank of San Francisco published a new research article on supply-and-demand-driven personal consumption expenditures relating to inflation. The methodology and corresponding graphs account for the evolving impact of supply versus demand-driven factors for inflation, which helps track whether supply or demand is responsible for overall inflation levels.
 
A blog post by the Joint Center for Housing Studies of Harvard University examines four significant issues to watch in Fannie Mae and Freddie Mac's newly published Equitable Housing Finance Plans. The post identifies the political durability of both the plans themselves and the impact of special-purpose credit programs, pushback of focus on race, and focus on reducing closing costs as areas to follow as the plans are implemented.
 
HUD published a post in its Our Way Home blog emphasizing its commitment to housing as infrastructure and the implementation strategies that HUD is taking under the Bipartisan Infrastructure Law. Current efforts include enabling affordable housing developments, improving resiliency, improving housing quality, and mitigating lead hazards. 
The week ahead
The National Housing Conference is a diverse continuum of affordable housing stakeholders that convene and collaborate through dialogue, advocacy, research, and education, to develop equitable solutions that serve our common interest.
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