Weekly update from the National Housing Conference |
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In this issue
February 13, 2022
Issue 91-6
• Fannie Mae settles $53 million fair housing suit for damages to communities of color
• Freddie Mac sets LIHTC equity record
• FHFA requests input on Strategic Plan
• National CORE issues $100 million in social bonds for affordable housing
• HUD releases annual Homelessness Assessment Report
• HUD relaxes ESG spending deadlines
• FHA updates Reasonable Diligence requirements
• Aguilar introduces Affordable Housing Resident Services Act
• Chart of the week: COVID-19 forbearance exits slow as share entering loss mitigation rises
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Single-Family Rentals and Homeownership
By David M. Dworkin, NHC president and CEO
Are investor-owned Single Family Rentals (SFRs) crowding out homebuying opportunities, especially for first-time homebuyers? Are SFRs contributing to rising rents? What happens to home values if there is a sudden exit from this market? What happens if there isn’t an exit from this market at all? These are questions that housers across the country are asking. The answers are still developing, but there is no question that SFRs have a growing impact on several large markets, especially in Atlanta, Georgia, Phoenix, Arizona, and cities throughout Florida. It’s also a growing trend elsewhere.
Last week the Senate Banking, Housing and Urban Affairs Committee held its second hearing on the impact of single-family residential rentals on home prices, neighborhood impacts and homeownership. The share of SFRs has grown exponentially over the past decade due to aggressive purchasing by a range of investors. These include individual small investors (aka. “Mom and Pops”) who own fewer than ten properties, Real Estate Investment Trusts (REITs) of all sizes, and institutional investors with inventories in the thousands. Several at the hearing expressed serious concerns about this market, the practices of some companies holding large inventories of SFRs, and their impact on homeownership. While it’s easy to reach broad conclusions with compelling anecdotes, we must understand this market in much better detail.
Single-family rental has always been a substantial part of the rental market. Small-sized investors remain the largest component of this market. The SFR business has always been challenging, requiring hands-on property management on properties that are widely scattered across a city or cities. Many of the smallest property owners were as financially stretched as their tenants, while others maintained business models that depended on minimal maintenance and rapid evictions. More...
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News from Washington | By Luke Villalobos
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Fannie Mae settles $53 million fair housing suit for damages to communities of color
The National Fair Housing Alliance (NFHA) and 20 regional fair housing organizations reached a $53 million settlement with Fannie Mae on Monday, ending a lawsuit in which they alleged that the enterprise had maintained foreclosed homes in White neighborhoods better than those in Black and Hispanic ones during the Great Recession. The agreement is the first time a federal court found that federal fair housing laws apply to real estate-owned (REO) properties, a holding with important implications for other NFHA lawsuits that accuse banks of similar practices. NFHA has committed to putting $35 million of the settlement toward increasing access to homeownership and other community development activities in the 39 metropolitan areas affected.
NFHA and its partners sued Fannie Mae in 2016 after collecting more than 49,000 photographs of thousands of Fannie Mae-owned foreclosed properties across 39 metropolitan areas that showed differential treatment. “The data and pictures collected in Plaintiffs’ investigation demonstrate that Fannie Mae has failed to conduct routine exterior maintenance and marketing of REO properties in communities of color, thereby leaving those REOs in a state of neglect,” the plaintiffs wrote in their initial complaint. Meanwhile, they alleged that Fannie Mae “satisfactorily conduct[ed] routine exterior maintenance and marketing of its REO properties in predominantly white neighborhoods, thereby leaving those REOs in a materially better condition.”
The settlement is the largest ever for an REO case and the first time a federal court confirmed the nation’s fair housing laws cover the maintenance and marketing of Real Estate Owned (REO) properties. “Black and Latino consumers were actively targeted by predatory subprime mortgage lenders in the run-up to the 2008 Financial Crisis and, as a result, homes in Black and Latino neighborhoods were respectively 2 and 2.5 times more likely to be foreclosed than homes in White communities. Millions of homeowners in Black and Latino communities lost their homes, and these neighborhoods were decimated,” said Lisa Rice, President and CEO of NFHA.
The case was brought against the company after it refused to address the practices alleged in the suit. Freddie Mac avoided legal action by working with NFHA to change its policies and procedures to address disparate impact on communities of color.
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Freddie Mac sets LIHTC equity record
On Tuesday, Freddie Mac announced that it set a new LIHTC equity record with $675 million in affordable multifamily housing investments in 2021. Freddie Mac achieved the record after FHFA raised the annual equity investment cap from $500 million to $850 million in September, after which the enterprise rapidly scaled its program to take advantage of the expanded volume. The investments funded an estimated 4,800 affordable housing units, including in underserved markets with unique challenges and communities with special needs households. Freddie Mac previously announced in January that it hit its 2021 cap in multifamily housing finance support.
“Together with our LIHTC syndicators we are preserving and creating affordable housing supply in the most underserved communities in America,” said Steve Johnson, vice president of Small Balance Loan and Targeted Affordable Sales & Investments at Freddie Mac.
Later in the week, Freddie Mac reported a net income of $12.1 billion for 2021 in its fourth-quarter financial results, an increase of 65% from 2020. Freddie Mac also reported its net worth as $28 billion, over three times what it had been before the COVID-19 pandemic.
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FHFA requests input on Strategic Plan
On Wednesday, FHFA requested public input on its 2022-2026 draft Strategic Plan. The plan aims to accomplish various objectives and achieve three overarching strategic goals: secure the government sponsored enterprises' safety and soundness, foster housing finance markets that promote equitable access to affordable and sustainable housing, and responsibly steward FHFA's infrastructure. The plans further note possible challenges to FHFA's successfully reaching the outlined goals, including the ongoing COVID-19 pandemic, climate change, increased mortgage interest rates, and a housing market constrained by supply, materials, and labor shortages.
National Mortgage News noted in an article that the draft plan specifically calls out the lack of authority to examine nonbank servicers, suggesting that FHFA may be interested in expanding its oversight to non-depositories.
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National CORE issues $100 million in social bonds for affordable housing
National Community Renaissance of California (National CORE) issued $100 million in social bonds on Thursday, marking just the second time bonds have been available by a nonprofit affordable housing developer in the United States. The issuance, which will finance affordable multifamily housing development and preservation, was made possible by National CORE's achieving an A+ rating from Standard and Poor's Global Ratings, allowing it to access nontraditional forms of affordable housing funding such as social bonds.
“This is a game-changer for the affordable housing industry and, more importantly, those who struggle with housing instability, said National CORE President and CEO Steve PonTell. “By accessing capital markets, we can dramatically accelerate the development and preservation of critically-needed affordable housing across the country.”
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HUD releases annual Homelessness Assessment Report
Last Friday, HUD released part one of its 2021 Annual Homelessness Assessment Report that outlines key findings of national, state, and local Point-in-Time (PIT) counts. In a single night in 2021, the report found that 326,000 people were experiencing sheltered homelessness, an 8% decrease from the previous year. The report also finds that sheltered chronic homelessness appears to have increased by 20%.
The United States Interagency Council on Homelessness subsequently released its Finding and Limitations of the 2021 Point-in-Time Count, noting that the pandemic had significantly disrupted the PIT count and that the data offers a more limited snapshot of homelessness than usual. Due to COVID-19 concerns, 40% of communities did not conduct a complete count of unsheltered individuals, including several communities with high rates of homelessness.
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HUD relaxes ESG spending deadlines
HUD announced on Monday that it would relax spending deadlines for Emergency Solutions Grants provided through the CARES Act, which many grantees use to provide emergency assistance to households experiencing homelessness. In a letter to grantees, HUD Deputy Assistant Secretary Jemine A. Bryon said that HUD would not enforce the deadline for grantees to have spent 80% of their total award by March 31 or face recapture. Bryon also said that HUD would consider extending the September 30 deadline for grantees to spend all of their funds.
Bryon said that the agency had decided to relax the deadlines because of continued administrative challenges due to the ongoing COVID-19 pandemic. “HUD recognizes the extremely difficult circumstances recipients are working under and have been working under since the start of the pandemic in 2020. We also appreciate how hard recipients have worked to serve our most vulnerable citizens during this critical time,” she said.
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FHA updates Reasonable Diligence requirements
FHA made technical changes on Monday to its deadlines for mortgagees to take the first action to foreclose on FHA-backed properties, known as the Reasonable Diligence Timeframe. FHA clarified that the deadline for Reasonable Diligence Timeframes for properties mortgagees identify as in need of foreclosure will begin 180 days after the expiration of the FHA foreclosure moratorium or 180 days after the end of the borrower's COVID-19 forbearance, whichever is later.
FHA had initially said that it would extend the deadline to 180 days after the expiration of the FHA foreclosure moratorium only. The changes affect both traditional and home equity conversion mortgages.
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Aguilar introduces Affordable Housing Resident Services Act
Last week, Rep. Pete Aguilar (D-Calif.) introduced the Affordable Housing Resident Services Act. The legislation would create a five-year grant program within the Department of Housing and Urban Development (HUD) to help provide resident services programs to affordable housing property owners. The grant would fill a critical funding gap for supportive services that assist residents of affordable communities in building successful futures. Eligible services would include assisting residents in obtaining healthcare services, enhancing education opportunities for children and youth, bolstering financial literacy, and preparing residents for homeownership, among other qualified activities.
“The COVID-19 pandemic put a spotlight on the lack of supportive services for low-income families in affordable housing,” Aguilar said. “While the federal government continues to invest in building housing for low-income families and seniors, there are currently very few dedicated funding sources for supportive services for these residents. My legislation closes that gap while giving families more of the tools they need to get ahead.”
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Chart of the week: COVID-19 forbearance exits slow as share entering loss mitigation rises
Data from Black Knight shows that though the number of loans exiting COVID-19 forbearance plans has decreased in recent months, the share that has entered loss mitigation has risen to nearly a third of total exits, leaving the forbearance success rate unclear. “This population is central not only to potential 2022 foreclosure risk but also are worth watching for the number of ways they may impact the housing finance market,” Black Knight reported.
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An article from the American Enterprise Institute discusses the role public housing played in the destruction of Black Bottom, a formerly prosperous Black neighborhood in Detroit. Modeled on the visions of modernist architect Le Corbusier, who envisioned “high-rise urban campuses without streets or stores” in place of traditional urban neighborhoods, the construction of public housing in communities like Black Bottom was disastrous both to community solidarity and residents’ wealth.
A new National Association of REALTORS® report explores the consequences of the “double trouble” of the current housing market: record-high prices and record-low inventory. Even in areas that have seen incomes rise faster than home prices during the pandemic, the home shortage still means it can be difficult for families, especially first-generation homebuyers, to achieve homeownership.
ProPublica investigates the consequences of private equity firms’ increasing level of investment in rental housing, which they find can have negative impacts on tenants’ quality of life as the firms seek to increase profits. ProPublica argues that the firms' entry into the rental market has been fueled in part by Freddie Mac, which has done 85% of its largest apartment deals with private equity firms in recent years.
The Conversation explains why communities with more affordable homes are not only more vulnerable to being damaged by natural disasters but also take two to three times longer to recover. These communities are vulnerable because they tend to comprise older homes on more marginal land prone to flooding or fires. But they also suffer more from the economic effects of disasters that can wipe out working-class jobs, leaving residents unable to return even when they have repaired their homes.
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Monday, February 14
Tuesday, February 15
Wednesday, February 16
Thursday, February 17
Friday, February 18
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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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