Federal Reserve (Fed) Chairman Jerome Powell delivered the Fed’s semiannual Monetary Policy Report to the Senate Banking Committee and House Financial Services Committee this week. Powell told both committees that the Fed is not planning on raising interest rates – which currently hover at a record low just above 0% – until the economy reaches maximum employment and the Fed sees sustained inflation rates above its target of 2%.

Powell said that inflation may increase temporarily as COVID-19 numbers improve, but that the economy has a long way to go before inflation becomes a concern. Though he refrained from commenting on stimulus measures currently being negotiated in Congress, Powell also noted that there has not been a strong link between higher deficits and inflation in recent years. In front of the Senate Banking Committee he said, “I really do not expect that we’ll be in a situation where inflation rises to troubling levels.”

Though Powell’s congressional testimony focused on higher-level economic trends, the Fed’s Monetary Policy Report noted the housing sector’s “remarkable” recovery in the second half of last year. The Fed pointed to the uptick in single-family home starts and existing home sales to levels not seen since before the Great Recession, crediting “historically low mortgage rates and the swift adaptation of the real estate sector to the pandemic” for the housing market’s rally. The report also noted that low mortgage rates’ upward pressure on home prices have helped to push household wealth to “record highs,” with gains particularly concentrated in upper-class households.

Analytics firm Black Knight released its first look at January 2021 mortgage data, reporting that the national mortgage delinquency rate fell below 6% for the first time since March of last year. The decline in mortgage delinquency in January to 5.85% represents a total of 121,000 fewer delinquent loans than the previous month but Black Knight notes that 3.1 million loans remain delinquent, of which over 2 million have been so for more than 90 days.

Though recent extensions of foreclosure moratoria and forbearance programs have “reduced near-term risk,” the company notes that such measures “may have the effect of extending the length of the recovery period,” since they may result in larger numbers of loans entering forbearance all at once when they are allowed to lapse. This concern is supported by recent research indicating that 83% of homeowners in forbearance have been so since April or May of last year and more than 40% have missed at least six mortgage payments – both indications that their capacity to pay may have been permanently compromised due to job losses or other reductions in income during the COVID-19 recession.

Despite these worrying signs, recent analysis from Urban Institute indicates that forbearance extensions reduce long-term foreclosure risk, especially for homeowners with negative equity. According to Urban Institute, such measures allow “struggling borrowers more time to benefit from improved employment prospects as the economy recovers and to build an equity cushion.”

The Consumer Financial Protection Bureau (CFPB) announced that it expects to push back the deadline for mandatory compliance with the amended general Qualified Mortgage (QM) final rule, and may alter or revoke the seasoned QM final rule in its entirety. Both rules become effective March 1, and mandatory compliance is set to begin July 1.

The action would have the effect of delaying the expiration of the “GSE patch,” which exempts loans sold to Fannie Mae and Freddie Mac from QM requirements and is scheduled to sunset when compliance with the general QM final rule becomes mandatory. According to NHC President and CEO David Dworkin, its elimination would “have significant unintended consequences of reducing mortgage lending – and ultimately the homeownership rate – even further.”

The announcement comes a few weeks after Acting CFPB Director Dave Uejio signaled that CFPB could reconsider rules implemented under the previous administration that have not yet taken effect if they are “not in line with our consumer protection mission and mandate.”

“An extension of the compliance deadline would allow lenders more time in which they could make QM loans based on a debt-to-income ratio or whether the loans are eligible for sale to Fannie Mae or Freddie Mac, and not just a pricing cut off,” Uejio said in a blog post on the potential changes.

Early Saturday, the House of Representatives passed a version of President Joe Biden’s $1.9 trillion stimulus package aimed at helping the economy recover from COVID-19. The package now heads to the Senate, where it will be considered under the rules of budget reconciliation.

The bill passed by the House includes $30 billion in emergency rental assistance, adding to the $25 billion in rental assistance that was included in the stimulus bill signed by former President Trump in December. The bill also provides $10 billion for mortgage assistance, and $5 billion for COVID-19 prevention among homeless populations. Assistance targeted at homeowners was originally omitted from the package proposed by the White House, but was included in the House bill after a push by a coalition of housing and civil rights stakeholders, including NHC.

In addition to measures protecting renters and homeowners, the bill includes money for direct stimulus payments and vaccine distribution, an extension of unemployment insurance through Aug. 29, and the establishment of a fully refundable child tax credit. The bill also includes a gradual minimum wage hike to $15 an hour, but a ruling by the Senate Parliamentarian that the minimum wage cannot be increased via budget reconciliation means that a portion of the bill is likely dead on arrival in the Senate.