Weekly update from the National Housing Conference |
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In this issue
May 29, 2023
Issue 92-19
· FHFA director testifies before House committee
·Sens. Thune, Moran introduce bill to reform Davis-Bacon
· OCC revises bank enforcement manual to address banks with persistent weaknesses
· Freddie Mac enhances automated assessment tool
· HUD welcomes Monocchio as Principal Deputy Assistant Secretary for Public and Indian Housing
· HUD announces $688,000 for public housing authorities to help youth
Chart of the week: Mortgages originated in 2020-2022 went to borrowers with excellent credit
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By U.S. Senator Todd Young (R-Ind.)
For a federal lawmaker, I’m a pretty optimistic person. Time and again, I’ve seen members of both parties rise above partisan rhetoric to solve big problems.
But, recently, there hasn’t been a lot to be optimistic about when it comes to our nation’s housing challenges.
I pulled some headlines from various news outlets across my home state of Indiana over the last few weeks, and they paint a bleak picture:
- "Affordable housing scarce across Indiana”
- “Study says Indiana housing cost burden is severe and Statewide”
- “Homeownership is out of reach for many Hoosiers, and advocates and tenants are ‘fed up’”
- “Why Indianapolis still doesn’t have enough affordable housing”
According to one of those articles, for every 100 “extremely low income” households in Indiana, there are only 39 affordable and available rental options.
You can probably run a search for headlines like these in any state in the country and find similar results.
Our nation’s housing crisis is a reality in city centers, growing suburbs, and rural towns. And the solution is to ensure that all Americans have access to quality, affordable housing.
In 2018, in one of those moments that affirmed my optimism, I proudly supported the first boost in the Low-Income Housing Tax Credit (LIHTC) in over a decade.
However, as those headlines indicate, we still face a serious dearth of affordable housing.
To help address these needs, I recently reintroduced the Affordable Housing Credit Improvement Act with Senator Maria Cantwell (D-Wash.). Our bipartisan bill will expand LIHTC and increase the stock of affordable housing by nearly two million units over the next decade.
Then there’s the Neighborhood Homes Investment Act (NHIA), a bill I introduced in March with Senator Ben Cardin (D-Md.) specifically to target areas of disrepair and blight, where the cost of rehabbing a home isn’t worth the investment.
The NHIA creates a federal tax credit that covers the cost between building or renovating a home in distressed areas and the price at which the home can be sold.
NHIA tax credits are awarded to project sponsors—developers, lenders, or local governments—through a competitive statewide application process administered by each state’s housing finance agency. State agencies would have an annual allocation of either $7 per capita or $9 million, whichever is higher.
For a state like Indiana, that’s nearly $48 million a year, supporting more than 9,000 new homes over a decade.
These are real solutions to our affordable housing crisis. With supporters like you letting your elected officials know how urgent the need is, I’m once again optimistic that we can act to address one of our biggest challenges.
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News from Washington | By Brittany Webb
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FHFA director testifies before House committee
FHFA Director Sandra Thompson testified last week before the House Financial Services Committee during the FHFA Oversight: Protecting Homeowners and Taxpayers hearing. The hearing focused on recent changes to Fannie Mae’s and Freddie Mac’s (the Enterprises) pricing matrix, particularly loan-level price adjustments. The adjustments spurred criticism and misunderstanding from media outlets and some in the industry. Many committee members pressed Thompson during the hearing on the impact of the fee change. They questioned whether borrowers with good credit paid more for their mortgages, a misconception circulating among news outlets.
“Unfortunately, certain media reports have distorted basic facts by painting an incomplete and misleading picture of these pricing updates. These media reports often make the fundamental mistake of assuming that the pricing grids previously in place were perfectly aligned with the risks faced by the Enterprises. I would like to dispel that myth: in fact, the pricing grids in effect prior to these updates had not been updated in many years and were not fully reflective of the capital framework with which the Enterprises are required to comply,” said Director Thompson in her testimony. “I want to be very clear on one key point, and one that bears repeating: under the new pricing framework, borrowers with strong credit profiles are not being penalized to benefit borrowers with weaker credit profiles. That is simply not true.”
Several committee members also questioned Thompson about changes to the FICO Classic credit model and the transition from tri-merge reporting to bi-merge reporting. Bi-merge reporting requires two credit reports as opposed to three. Some members expressed concern the change will impact potential borrowers’ scores. Thompson addressed those worries, noting FHFA has conducted a review and found no significant impact from the shift to bi-merge reporting. Thompson also touched on other topics, including appraisal bias, the effect of rising interest rates on affordable housing, outreach programs for first-time homebuyers, and technological innovations.
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Sens. Thune, Moran introduce bill to reform Davis-Bacon
Sens. John Thune (R-S.D.) and Jerry Moran (R-Kan.) introduced the Housing Supply Expansion Act, a bill that would make targeted reforms to requirements under the Davis-Bacon Act. Davis-Bacon requires contractors and subcontractors to be paid prevailing wages for work in certain federally funded or assisted construction projects. Thune and Moran’s legislation aims to increase housing supply by reducing construction regulatory barriers and freeing up capital for building additional affordable housing.
“The lack of affordable housing is an issue that is consistently raised by folks as I travel throughout South Dakota,” said Thune. “These shortages affect prospective homebuyers and renters, as well as small businesses that are trying to overcome pressing workforce needs. This common-sense legislation would increase the supply of affordable housing options, reform archaic requirements in the Davis-Bacon Act, and cut through its overly-burdensome red tape.”
The Mortgage Bankers Association (MBA), National Association of Home Builders, the National Multifamily Housing Council, and the National Apartment Association support the bill.
“A recent Berkley study found that prevailing wage requirements raise construction costs by more than $30 per square foot. By that metric, these wage requirements are increasing construction costs by $27,000 for an average 900 square foot apartment, which ultimately translates into higher rents. To solve the housing affordability crisis affecting many of our communities, Congress needs to look at all the factors driving up housing costs, which is why the nation’s home builders strongly support this bill,” said Jerry Konter, chairman of the National Association of Home Builders.
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OCC revises bank enforcement manual to address banks with persistent weaknesses
The Office of the Comptroller of the Currency (OCC) announced revisions to its policies and procedures manual on bank enforcement actions. The changes reflect OCC’s consideration of actions against larger and more complex banks that exhibit or fail to correct persistent weaknesses. The changes include adding “Appendix C: Actions Against Banks with Persistent Weaknesses” to the Policies and Procedures Manual (PPM) 5310-3, “Bank Enforcement Actions and Related Matters,” which provides greater transparency and clarity about how the OCC determines if a bank has persistent weaknesses. The changes also include identification of possible additional actions the agency may take to address those weaknesses, such as requiring a bank improve its capital or liquidity position, as well as restricting the bank’s growth, business activities, or payments of dividends. As warranted, the OCC may also require a bank to simplify or reduce its operations, including reducing assets, divesting subsidiaries or business lines, and/or exiting from one or more markets of operation.
“This revised policy promotes strong management by making clear that a bank’s inability to correct persistent weaknesses will result in proportionate, fair, and appropriate consequences, including growth restrictions and divestitures when warranted,” said Acting Comptroller of the Currency Michael Hsu. “These guardrails are especially important today, as banks grow to better serve their communities, improve their competitiveness, and achieve economies of scale. Well-managed banks provide invaluable support to our economy, and this revised policy promotes this result.”
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Freddie Mac enhances automated assessment tool
Freddie Mac announced it updated its automated income assessment tool to allow lenders to analyze direct deposit income and include the borrower’s digital paystub data. The additional details help lenders calculate income quicker and more precisely, improving loan quality, simplifying processes, and expanding access to credit by moving beyond traditional underwriting methods. According to the announcement, income documentation accounts for one-third of all transaction defects. The new capability will be available to lenders through Freddie Mac’s Loan Product Advisor® (LPASM) asset and income modeler beginning June 7.
“Over the last year, we’ve consistently rolled out innovations to ensure our digital tools are improving speed and efficiency, reducing risk, and, ultimately, helping us serve our mission by reaching more qualified borrowers,” said Kevin Kauffman, Single-Family Vice President of Seller Engagement at Freddie Mac. “Today’s innovation further automates income assessment by using historical direct deposit pay patterns and current gross income from recent paystubs, which can help more families achieve homeownership.”
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HUD welcomes Monocchio as Principal Deputy Assistant Secretary for Public and Indian Housing
Richard Monocchio was sworn in as Principal Deputy Assistant Secretary for Public and Indian Housing last week. Monocchio brings over 30 years of experience in public service having served the City of Chicago as its Buildings Commissioner, Aviation Chief of Staff, and First Deputy Housing Commissioner. He was also the Executive Director of the Housing Authority of Cook County.
“I am thrilled to bring my experience to HUD, after serving as a leader in affordable housing for the City of Chicago, as the executive director for public housing and voucher efforts for Cook County, Illinois, and as an advisor in Congress to better the lives of the people HUD serves. Together, we will enhance the quality, affordability, and safety of housing across this country,” said Principal Deputy Assistant Secretary Monocchio.
In addition to this announcement, HUD awarded $95.5 million through the Indian Community Development Block Grant for 55 Native communities. “The funding announced today will help make Tribal communities safer, and healthier, and help families thrive,” said HUD Secretary Marcia Fudge.
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HUD announces $688,000 for public housing authorities to help youth
HUD announced $688,000 in funding to 12 public housing authorities (PHAs) in 9 states to address foster youth homelessness. The PHAs will receive 80 non-competitive Foster Youth to Independence vouchers to access as they receive referrals from a partnering Public Child Welfare Agency. The Foster Youth to Independence initiative invests in youth within the child welfare system and continues HUD’s commitment to alleviating youth homelessness and housing instability.
“This funding will help public housing agencies meet the needs of youth who have aged out of the foster care program so they can have access to safe, stable, and affordable homes,” said HUD Secretary Marcia Fudge.
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Mortgages originated in 2020-2022 went to borrowers with excellent credit
A CalculatedRisk blog post from Bill McBride examines two key housing themes—low inventory and few distressed sales—that define the current housing cycle. The article uses data from the Federal Reserve Bank of New York to examine mortgage originations by credit scores from 2003 to 2023. The data shows many loans went to borrowers with low credit scores and little equity during the housing bubble. This trend contrasts mortgage origination credit scores between 2020-2022 when most borrowers had high credit scores and equity.
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An article in The Atlantic takes a deep dive into a zoning debate underway in Colorado, focused on Park Hill Golf Course and a redevelopment plan to build 2,500 homes and commercial space. The plans generated discussions within the local government and highlighted the impacts of NIMBYism on affordable housing development, as well as the influence of voters on overall development plans.
An opinion piece in The Hill by Antonia Fasanelli and Stockton Williams examined how old federal buildings can be transformed into housing. The column notes many cities have considered converting vacant office space into affordable housing and highlights the opportunity to transition obsolete government buildings into units to help address homelessness. According to the National Homelessness Law Center, the federal government identified 65 properties suitable for housing conversions, and development applications were submitted for 10. However, only three were ultimately approved.
The African American Mayors Association sent a letter to Senator Tim Scott (R-S.C.) in response to his ROAD to Housing Act. The letter commended the legislation and asked for more resources to help address racial disparities in homeownership. In addition, the letter explicitly cites a need for complementary legislation to support public housing programs.
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Tuesday, May 30
Wednesday, May 31
12-1 pm ET
12:30-5 pm ET
2-3 pm ET
Friday, June 2
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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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