Labor Day is traditionally when America starts paying attention to the November elections and undecided voters begin making their decisions. Although it’s hard to imagine that swing voters haven’t been impacted by the 24-hour coverage of the presidential candidates, it’s likely the historical pattern of decisions being solidified in the final weeks will still occur. This year, those decisions will be made while demonstrations for racial justice and the impacts from COVID-19 continue.
Congress is also focused on the elections, and while Democrats enjoy encouraging poll numbers, they are haunted by the 2016 outcome. Capturing undecided voters is an important consideration as both parties determine the size and scope of the next COVID-19 relief package. Government funding is also set to run out on Sept. 30 and a government shutdown could have devastating impacts to the party that voters consider at fault. A combined bill with some COVID-19 relief and a continuing resolution to fund the government is increasingly likely to avoid a shutdown.
Presidential Actions on COVID-19 Relief
After the breakdown of negotiations on the next COVID-19 relief package between Democrats and the Administration, President Trump issued an Executive Order and three Presidential Memorandums in early August. Many considered these actions symbolic with limited impact.
- Directed the Secretary of Health and Human Services and the Director of Centers for Disease Control and Prevention to consider whether any measures temporarily halting residential evictions for failure to pay rent are reasonably necessary to prevent the further spread of COVID-19. Also directed the Secretary of the Treasury and the Secretary of Housing and Urban Development to identify any available federal funds to provide temporary financial assistance to renters and homeowners who, as a result of the financial hardships caused by COVID-19, are struggling to meet their monthly rental or mortgage obligations.
- Deferred payroll tax of 6.2% of Social Security Tax for Sept. 1, 2020, through Dec. 31, 2020, for those making less than $104,000. Unless legislation is enacted, the taxes would still be due later, but without penalty or interest. It is not clear how the taxes would be collected.
- Extended student loan relief provided under the Coronavirus Aid, Relief, and Economic Security (CARES) Act that allows for the temporary suspension of student loan payments and the waiver of interest on student loans held by the Department of Education until Dec. 31, 2020.
- Approved a lost wages assistance program that authorizes the Governor of each state to provide $400 payment per week, which includes a $300 federal contribution, to eligible claimants from the first week of unemployment ending Aug. 1, 2020.
Increased Pressure for Rental Assistance
A broad housing coalition including the National Housing Conference, National Association of Home Builders and National Association of Realtors® sent a letter to Congressional leaders last week leaders urging immediate action on rental assistance.
The letter read in part:
“The need for action on behalf of America’s renters is urgent. According to the latest information from the U.S. Census bureau, nearly 21% of renter households were behind on their rent payment. With the expiration of the enhanced unemployment benefits, enacted under the CARES Act, the percentage of households who fall behind on their rent and face eviction is sure to increase.
Renters impacted by the COVID-19 pandemic already owe an estimated $25 billion in back rent and could owe up to $70 billion by the end of the year. Without federal rental assistance, these debts will be unsustainable and financially ruinous for renter households across the nation. Failure to act will put tens of millions of renters at risk of being evicted, undermine the stability of our rental housing system, and needlessly prolong our nation’s ability to fully recover from the economic damage that has been wrought by this pandemic.“
Fannie and Freddie 50 Basis Point Fee
In mid-August, Fannie Mae and Freddie Mac issued an “Adverse Market Refinance Fee” on mortgage refinance loans sold to them that was set to begin on Sept. 1, 2020. This was met with strong opposition from lenders and housing groups who felt the estimated increased cost of $1,400 for the average homeowner was contrary to all other COVID-19 relief efforts.
Republicans, Democrats and the Administration were also opposed. The Federal Housing Finance Agency (FHFA) ultimately delayed the implementation to Dec. 1, 2020, and added exemptions including refinance loans with loan balances below $125,000 -- nearly half of which are comprised of lower income borrowers at or below 80% of area median income. Affordable refinance products, Home Ready and Home Possible, are also exempt.
CBO Report on the Effects of Recapitalizing Fannie Mae and Freddie Mac
The Congressional Budget Office (CBO) released a report named “Effects of Recapitalizing Fannie Mae and Freddie Mac Through Administrative Actions“. It examines the options for recapitalizing the government-sponsored enterprises (GSEs) by allowing them to retain all of their profits for an initial period, after which they would sell new common stock to investors to replace the Treasury’s ownership stake. Those actions would be taken administratively.
The analysis looks at how the recapitalization options would affect various factors:
- CBO’s budgetary treatment of the GSEs and its baseline budget projections;
- Cash flows between the GSEs and the Treasury and other shareholders;
- The possibility that the GSEs would be released from conservatorship, remain in conservatorship or be put in receivership; and
- Mortgage markets and other federal institutions that play a role in the housing finance system.
Extension of Eviction and Foreclosure Moratorium through End of Year
FHFA announced an extension of the eviction and foreclosure moratorium on mortgages backed by Fannie Mae and Freddie Mac through the end of 2020. The Federal Housing Administration announced the same extension on single-family mortgages covered under the CARES Act.