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Weekly update from the National Housing Conference
In this issue
September 27, 2020 I Issue 89-35

  • FSOC supports stricter capital requirements for GSEs 
  • Fed’s ANPR on CRA modernization offers significant improvements
  • FHFA solicits feedback on strategic plan and Duty to Serve changes
  • House hearing criticizes Fed for limited use of Main Street Lending Program
  • Senate report highlights persistent inequality in housing
  • Ginnie Mae announces new restrictions on LIBOR-backed loans
  • HUD awards more CARES Act funds to state and local housing organizations
  • Chart of the week: Home prices up nearly 7% from 2019
Find the information you need at NHC's COVID-19 Housing Resource Center
Now is the time to start planning for an economic recovery
by David M. Dworkin, NHC President and CEO

Dear Friend,

Congress’ work to address the immediate challenges created by COVID-19 is far from over. However, now is the time to start planning and think big when it comes to investing in new policies and programs that will not only pull us out of the current recession, but propel the U.S. forward, creating opportunities for future generations. 
 
To accomplish this, we must expand the toolbox available to states and localities to support their communities. This includes enhancing existing and creating new tax credits that incentivize the development and preservation of affordable housing, as well as direct subsidies to close the gaps in building homes that are affordable for more Americans. Housing construction has led the way out of every major recession since 1960, with the single exception of 2009. It can lead the way forward in this one as well.
 
The House-passed Moving Forward Act, H.R. 2, provides the blueprint for comprehensive reinvestment in the fabric of American life – investment that drives opportunity for all families, all communities and all workers for years to come. The $1.5 trillion plan, introduced over the summer by Rep. Peter DeFazio (D-Ore.), has received support from a diverse group of organizations, including the Affordable Housing Tax Credit Coalition, the National Council of State Housing Agencies and the American Institute of Architects. The Democrat-drafted bill has been rejected by Republicans and the White House, while gaining the support of most Democrats and the Biden campaign. While partisan lines of demarcation are no surprise in an election year, many components of the bill, particularly the housing sections, can guide work during a post-election effort to revive the economy over the coming year, regardless of who wins.
 
In addition to physical infrastructure investment, the legislation proposes extensive investment in communities and housing. State and local governments would be able to access better financing through the permanent reinstatement of Build America Bonds and Advance Refunding Bonds, in addition to expanded use of Private Activity Bonds (PABs). The bill would also make the New Markets Tax Credit permanent, inviting private capital to invest further in distressed communities. 
 
The global pandemic has shined a bright light on the need to provide safe, stable and sustainable housing for all Americans. The Moving Forward Act would invest $100 billion into affordable housing, creating and preserving nearly two million affordable housing units. The legislation would also target investment to developing affordable housing for low-income households by expanding the Low-Income Housing Tax Credit (LIHTC), including additional incentives for rural and tribal communities. LIHTC has a long history of bipartisan support.
News from Washington
FSOC supports stricter capital requirements for GSEs 

The Financial Stability Oversight Council (FSOC) voted unanimously in support of the Federal Housing Finance Agency's (FHFA) Enterprise Regulatory Capital Framework, published earlier in the summer.
At the meeting on Friday, Sept. 25, FSOC raised concerns about the potential risk posed to the U.S. financial system by Fannie Mae and Freddie Mac – should they experience undue financial strain.
 
NHC encouraged FHFA to revise the proposed rule in a comment letter signed by 13 other housing and civil rights groups in August.
During Friday’s meeting, however, FSOC members considered whether FHFA should require the GSEs to hold more capital than what is currently envisioned in the proposed framework. FSOC Deputy Assistant Secretary Howard Adler said, “It is possible that additional capital could be required for the enterprises to remain viable…in the event of a severely adverse stress, particularly if the enterprises’ asset quality were ever to deteriorate to levels comparable to the experience leading up to 2008 financial crisis.”

The recommendations follow FSOC’s decision to conduct an activities-based review of the secondary mortgage market in July. Based on the review, FSOC recommended FHFA coordinate with other regulatory agencies to adopt a more consistent approach to capital requirements across all market participants, consider “alternative approaches for more dynamically calibrating the capital buffers,” and implement capital definitions similar to those used in the U.S. banking framework.
FHFA Director Mark Calabria commended FSOC for its “acknowledgement that the Enterprises' activities could pose risk to financial stability.” He continued, “Today's announcement is an important and necessary step to reform and protect the housing finance system so that the Enterprises can continue serving the market during crises. The next critical step will be finalizing the capital rule with the benefit of the Council's valuable recommendations."

Acting Comptroller of the Currency Brian P. Brooks also issued a statement of support: “I also support FHFA Director Calabria’s efforts and believe that the FSOC’s recommendations strengthen the efforts already underway to enhance risk management and prudential controls in the housing finance system.”
Fed’s ANPR on CRA modernization offers significant improvements

On Monday, the Federal Reserve Board (Fed) voted unanimously to approve an Advanced Notice of Proposed Rulemaking (ANPR) to modernize the Community Reinvestment Act (CRA). NHC endorsed the proposal, which lays the groundwork for aligning all three regulators – including the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) – in a united regulatory regime, and is likely to improve investment to low- and moderate-income households and communities, and clarify examination requirements.
“In a year where partisanship has tainted every corner of political discourse, this is a refreshing exception,” said NHC President and CEO David Dworkin in a statement. “The Fed’s unanimous support for a modernized approach to CRA sets the table for the FDIC and OCC to come together on a unified approach.”
Sen. Sherrod Brown (D-Ohio), ranking member of the Senate Banking Committee, similarly applauded the ANPR, saying, “The proposal laid out today shows that the Federal Reserve has been listening to civil rights leaders, affordable housing advocates, and local officials about what’s needed to improve and strengthen [CRA].”
The ANPR includes a 120-day comment period; Fed Governor Lael Brainard said, “By reflecting stakeholder views and providing a long period for public comment, the ANPR is intended to build a foundation for the banking agencies to converge on a consistent approach to strengthening the CRA that has broad support among stakeholders.”
Several organizations, including the American Bankers Association, Consumer Bankers Association, and the National Community Reinvestment Coalition (NCRC) commended the Fed’s proposal.
NHC looks forward to continuing to work with the Fed, OCC and FDIC as they revise and eventually finalize the CRA rulemaking. NHC plans to reconvene its CRA Working Group and coordinate with members to respond to the ANPR.
FHFA solicits feedback on strategic plan and Duty to Serve changes

FHFA published two Requests for Input (RFIs) this week as Director Mark Calabria continues to prepare the GSEs for release from conservatorship. FHFA asked stakeholders to react to the 2021-2024 Strategic Plan. The plan includes three new goals: ensuring safety and soundness through “world-class supervision;” supporting a “competitive, liquid, efficient, and resilient (CLEAR)” housing finance market; and establishing FHFA as a “model of operational excellence.” Comments are due by Oct. 5.

"The goals and milestones laid out in the plan ensure that that FHFA's supervision is strong, well-executed and fulfills all statutory requirements, including ending the conservatorships of the enterprises responsibly," said Calabria. 

FHFA is also seeking comments on proposed Duty to Serve (DTS) changes to the 2020 objectives in the GSEs’ 2018-2020 Underserved Markets Plans. The modifications proposed by Fannie Mae and Freddie Mac cover a wide range of programs, including affordable housing preservation, manufactured housing and rural housing. FHFA has requested input on the impact of the proposed modifications including any concerns created by current market conditions as a result of COVID-19.
 
NHC has advocated for the expansion of the DTS goals to include minority homeownership goals, with specific targets for individual racial and ethnic groups. This broader mandate – consistent with the authority provided by the Housing and Economic Recovery Act of 2008 –would address the national crisis in minority homeownership.
Join these health experts and former U.S. Surgeon General Dr. Regina M. Benjamin for our Health and Housing Webinar on Sept. 30!
House hearing criticizes Fed for limited use of Main Street Lending Program

The House Financial Services Committee convened a hearing this week to examine the Fed and Treasury Department’s COVID-19 response. The hearing examined the progress of several emergency relief programs created at the onset of the pandemic, including the Main Street Lending Program, the Municipal Liquidity Facility and the Paycheck Protection Program (PPP).
Committee Chairwoman Rep. Maxine Waters (D-Calif.) applauded the Treasury and Fed’s work to address problems with PPP and expand several programs, but expressed apprehension over the implementation of other programs. “I am very concerned that much of the $500 billion Congress allocated in the CARES Act to Treasury, most of which was to support Fed lending to help reeling businesses, nonprofits, and state and local governments, has gone unused,” said Waters. “Here we are almost six months after the passage of the CARES Act, and a mere 0.2% of Main Street Lending Program funds and 0.3% of Municipal Liquidity Facility funds have been put to use.”

Fed Chair Jerome Powell said the Fed has made several adjustments to the Main Street Lending Program to better support eligible businesses. Powell said more than 200 loans, totaling about $2 billion, have been funded or are currently in the pipeline. Responding to concerns about underusage of the program, Powell said, “Main Street loans may not be the right solution for some businesses, in part because the CARES Act states clearly that these loans cannot be forgiven.” He said, “The evidence suggests that most creditworthy small and medium-sized businesses can currently get loans from private-sector financial institutions.”

Treasury Secretary Steven Mnuchin defended the actions of the administration, saying “Treasury has been working hard to implement the CARES Act with transparency and accountability.” Mnuchin said Treasury remains committed to working with Congress to pass a phase IV relief package.
Senate report highlights persistent inequality in housing

On Monday, Sen. Brown released a retrospective on fair housing. The minority staff report, entitled “Turning Back the Clock,” spotlights the erosion of fair housing under the Trump administration. More than 50 years following the passage of the Fair Housing Act, the report finds that systemic inequality persists, as evidenced by the disproportionately low homeownership rates for Black and Latinx households compared to White households. “The inequities we see today are the legacy of government policies and systemic discrimination in the financial system that made it difficult for Black and brown households to achieve access to equal housing opportunities,” said Sen. Brown in a statement.
In response to recent regulatory actions that limit fair housing enforcement, including the Department of Housing and Urban Development’s (HUD) disparate impact final rule and the termination of the Affirmatively Furthering Fair Housing rule, the report recommends Congress and the administration “immediately reverse course” and “restore the Fair Housing Act to its full strength.” The report suggests expanding tools for states and localities, enhancing oversight and enforcement, supporting community development investment and breaking down barriers to minority homeownership.
 
Several housing and diversity organizations expressed their support for the report and its findings. Marc Morial, president and CEO of the National Urban League, said, “This report contains sensible and achievable policy recommendations, long supported by the National League, to attack systems that perpetuate inequality, including improved housing data collection, improved access to borrowing, real enforcement of our housing laws…and meaningful investment in long-forgotten communities.”
“We commend and thank Senator Brown for his leadership in shining a light on how this administration has sought to dismantle fair housing and lending protections,” said Lisa Rice, president and CEO of the National Fair Housing Alliance.
Ginnie Mae announces new restrictions on LIBOR-backed loans
 
Beginning in January 2021, Ginnie Mae will cease its acceptance of certain mortgages with interest rates tied to the London Interbank Offered Rate (LIBOR), following the gradual phaseout of the once widely used benchmark rate after UK regulators uncovered manipulation and rigging in 2012. The restrictions will apply to reverse mortgages and adjustable-rate mortgages (ARMs). Notably, however, both products make up only a small portion of Ginnie Mae securitizations today. LIBOR – as well as the availability of new loans backed by the benchmark – is scheduled to expire at the end of 2021.
 
Earlier this summer, the Consumer Financial Protection Bureau (CFPB) took several steps to support the mortgage industry’s transition away from LIBOR and towards alterative benchmarks, such as the Secured Overnight Financing Rate. The CFPB published FAQs, updated its consumer handbook on ARMs, released a fact sheet and issued a Notice and Opportunity to Comment. 
HUD awards more CARES Act funds to state and local housing organizations

This week, HUD awarded $500,000 in additional CARES Act funding to 15 different Fair Housing Assistance Programs (FHAP) across 12 states to extend COVID-19 support to households and communities. Recipients include the Connecticut Commission on Human Rights and Opportunities, the Iowa Civil Rights Commission, the City of Austin Equal Employment and Fair Housing Office, the Washington State Human Rights Commission and more. In June, HUD made a similar award to 19 FHAP organizations. HUD Assistant Secretary for Fair Housing and Equal Opportunity Anna María Farías said, “These organizations are extremely knowledgeable about the communities they serve and how COVID-19 is affecting housing choices, but they need financial resources to address the issues they are seeing.”

Throughout the summer, HUD has encouraged recipients of CARES Act funding, including recipients of Emergency Solutions Grants and Community Development Block Grants, to support a wide-range of COVID-19-related housing needs in the communities they serve, ranging from addressing the unique needs of homeless populations during a pandemic to rental assistance.  
Chart of the Week
Chart of the week: Home prices up nearly 7% from 2019

FHFA’s Home Price Index (HPI) for July reported a 6.5% year-over-year increase in home prices. Home price gains were seen in every region of the country, but were particularly high along the coasts. Even in the midst of a pandemic, the housing market has experienced monthly gains. Between May and July of this year, home prices saw the largest two-month increase recorded since the creation of HPI in 1991.
What we're reading
A new tool from the Urban Institute allows users to measure how inclusive their city is. To accompany the data feature, the Urban Institute also published an analysis of which cities have become more or less racially inclusive. In recent years, cities like Duluth, Minnesota, Waterbury, Connecticut, and Aurora, Illinois have become more inclusive, experiencing a decline in income and racial segregation. Other cities, such as Hialeah, Florida, Canton, Ohio and Trenton, New Jersey have become less inclusive, seeing an increase in minority poverty rates and a decrease in minority homeownership.
 
Novogradac recently published predictions for how a major Democratic victory in November would impact community development and affordable housing. Under a Democratic administration and Democrat-led Congress, Novogradac said issues such as “healthcare, the environment, racial justice and infrastructure would likely move to the forefront.” New tax incentives, including the expansion of the Low-Income Housing Tax Credit and the New Markets Tax Credit, "could be attached to early Democratic legislation if there is a sweep.”
 
A recent report from the Center on Budget and Policy Priorities (CBPP) reveals the precarious state of cost-burdened renters even prior to COVID-19, underscoring the need for immediate rental assistance. The report compares median renter household incomes to median rents since 2001, concluding that renters’ income hasn’t kept up with housing costs. “Policymakers must urgently provide emergency rental assistance to help families struggling to afford housing in the current crisis and take longer-term steps to address the underlying affordability problem that the new data reflect,” CBPP said. 
The week ahead
Monday, September 28
 
Tuesday, September 29
 
Wednesday, September 30
 
Thursday, October 1

Friday, October 2
The National Housing Conference has been defending the American Home since 1931. We believe everyone in America should have equal opportunity to live in a quality, affordable home in a thriving community. NHC convenes and collaborates with our diverse membership and the broader housing and community development sectors to advance our policy, research and communications initiatives to effect positive change at the federal, state and local levels. Politically diverse and nonpartisan, NHC is a 501(c)3 nonprofit organization.
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