Weekly update from the National Housing Conference
News from Washington | By Luke Villalobos
FOMC increases interest rates by 0.75

The Federal Reserve raised the interest rate by 75 basis points on Wednesday. After the Bureau of Labor Statistics' August report showed continued inflation increases, some anticipated that the Fed might go even further. During the press conference, Powell reiterated the Board's commitment to bringing inflation rates down to two percent during the press conference. "We have got to get inflation behind us. I wish there were a painless way to do that. There isn't," Powell said. In anticipation of the Fed’s move, mortgage interest rates rose above 6% for the first time since 2008. Freddie Mac's latest Primary Mortgage Market Survey shows the 30-year fixed-rate mortgage is now averaging 6.29 percent.
The Fed released a Summary of Economic Projections in conjunction with the meeting, sparking renewed concerns of an impending recession. Relatedly, Fannie Mae published an economic and housing outlook blog post after the rate announcement projecting modest economic growth over the rest of 2022 but a moderate recession in 2023 coinciding with a weakened labor market. "The rise in rates is having the Fed's desired effect on housing, as house price growth began to slow in June. We expect the slowdown in housing to continue through 2023 as affordability constraints mount for potential homebuyers, and considering, too, that refinance activity has been significantly curtailed by the rise in mortgage rates," Doug Duncan, Fannie Mae Senior Vice President and Chief Economist, said.
Bank CEOs testify at Senate Banking Committee

The U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing this week with heads of seven of the biggest U.S. banks, including Wells Fargo CEO Charles Sharp, Bank of America CEO Brian Moynihan, and JP Morgan Chase Jamie Dimon. The hearing focused on industry oversight, including questions on ESG ratings and sustainability goals, fraud, and Zelle reimbursements.

Sen. Catherine Cortez Masto (D-NV) and Sen. Jon Ossoff (D-GA) questioned the CEOs on affordable housing and housing supply. Cortez Masto called on banking leaders to expand affordable housing projects and asked how banks could increase capital, citing a successful rental development in Las Vegas and other parts of Nevada. Cortez Masto went on to question whether banks could finance these projects alone, prompting Jane Fraser, CEO of Citigroup, to state, “ the low [income housing] tax credit are an absolutely critical component to be able to bring together that debt for elements of financing for affordable housing projects, and we would certainly be encouraging expansion of those credits.” Bill Demchak, CEO of PNC, claimed referring to the Housing Credit, “this is one of the most successful private-public partnerships that we can point to in terms of having the intended outcomes, and we should expand it and do more things like it.” Cortez Masto reaffirmed her commitment to the Affordable Housing Credit Improvement Act. That is a supply policy NHC actively supports that would make important changes to the Low Income Housing Tax Credit. 
Ossoff highlighted the importance of accessory dwelling units (ADUs) and how the recent regulatory changes at FHFA would have to allow additional lending to finance the construction of ADUs. Bank lenders are expected to comment on how they can capitalize on bringing greater housing supply and meet affordable housing commitments. 

USDA continues broadband investment

The USDA announced $502 million in funding for the ReConnect program, providing high-speed access to rural areas across 20 states. This additional funding is included in President Biden's Bipartisan Infrastructure Law, providing a $65 billion investment to expand affordable internet access across the United States.
Thirty-two awards will be granted throughout rural states and tribal lands to support socially vulnerable communities. As of this week's announcement, the Sault Ste. Marie Tribe of Chippewa Indians in Michigan will receive a $25 million grant to connect 1,217 people and 26 businesses to high-speed internet access. Net Vision Communications, LLC will obtain a $12.4 million loan serving 4,587 people, 300 businesses, nine farms, and 29 schools in Missouri. An $8.1 million loan and $81 million grant deployed to the Southern Plains Cable LLC in Oklahoma will connect 7,093 people, 230 businesses, six farms, and 29 schools to affordable internet access.
Last week's news follows a July announcement that the ReConnect Program invested $356 million in serving rural residents and businesses across 11 states. ReConnect investments now total $858 million, with additional announcements expected in the coming weeks. 
Treasury announces CDFI investments

Vice President Kamala Harris and Secretary of the Treasury Janet Yellen announced that Treasury is making over $8.28 billion in investments to community financial institutions through the Emergency Capital Investment Program (ECIP) on Wednesday. The funding will support 162 financial institutions, including mission-driven community development financial institutions (CDFIs) and minority depository institutions.
Treasury is also providing additional credit to ECIP recipients that pursue "deep impact lending" that targets low-income borrowers, underserved small businesses, deeply affordable housing, and development in persistent poverty communities. Treasury published a complete list of recipients with the announcement. Most ECIP investments go to Mississippi, Louisiana, North Carolina, California, and Texas.
CFPB seeks comments on new mortgage products

The CFPB announced it is seeking public input on ways to spur new mortgage products. The goal is to help households, particularly with ways to improve mortgage refinancing. CFPB also expressed interest in automatic loss mitigation assistance for borrowers struggling to make payments and promoting competition to support household financial stability. The announcement noted housing costs and refinancing's economic impact on consumers, citing a study that found a borrower could save nearly $300 per month after refinancing. With mortgage rates rising, refinancing rates have dropped 70 percent, according to the announcement. New mortgage products could help homebuyers benefit from an interest rate drop in the future. 
The request announcement comes days after the CFPB released its annual report on residential mortgage lending activity and trends for 2021. The report, which relies on Home Mortgage Disclosure Act (HMDA) data submissions, had three major findings. First, home purchase loans drove increases in mortgage originations while refinance loans fell. Second, the number of mortgage lending institutions reporting HMDA data fell in 2021. And third, Asian, Black, and Hispanic borrowers' home purchase loan shares increased in 2021 compared to 2020.
Comments for the CFPB's request for input are due 60 days after publication in the Federal Register.  
Hurricane Fiona prompts disaster relief

President Biden made federal funding available for Puerto Rico in a declaration of disaster announcement after Hurricane Fiona caused devastating flooding and infrastructure damage on the island. Funding includes assistance grants for temporary housing, home repairs, low-cost loans, and programs to assist impacted residents and business owners.
As recovery and disaster relief deploys to Puerto Rico, Fannie Mae and Freddie Mac issued press releases reminding homeowners and renters impacted by natural disasters that they are eligible for mortgage assistance and disaster relief options. These include authorization of forbearance for up to 90 days, eligibility to reduce or suspend mortgage payments for up to 12 months, and additional opportunities to assist homeowners with missed payments. 
OCC reports mortgage performance improvement

The Office of the Comptroller of the Currency released its Mortgage Metrics Report on the performance of first-lien mortgages during the second quarter of 2022, showing an improvement in overall performance. The report found that 97 percent of mortgages were current and performing compared to 95 percent at the same time last year. In addition, seriously delinquent mortgages were down by 1.5 percent compared to 1.8 percent the previous quarter and 3.8 percent during the second quarter of 2021. The report also showed that servicers initiated 11,015 foreclosures and 28,109 modifications in Q2 2022, fewer than in Q1 2022.
Chairwoman Waters introduces CRA legislation

Last week, House Committee on Financial Services Chairwoman Maxine Waters (D-CA) introduced a new bill called Making Communities Stronger Through the Community Reinvestment Act. The bill would update the Community Reinvestment Act (CRA) to ensure bank services are meaningful and responsive to the needs of low- and moderate-income communities of color. It provides communities with stronger voices on CRA exams and activities, requires CRA examiners to consider all unlawful activity on exams, requires exams to consider lending done in partnership with non-banks and fintechs, and encourages small-dollar mortgages. The bill also seeks to use data to identify discrimination and disparities better.
HUD celebrates House America's first anniversary

HUD marked its first year of House America on Tuesday, a federal initiative that leverages the American Rescue Plan and additional federal resources to address the homelessness crisis. This initiative aims to serve 100,000 households experiencing homelessness and support the further development of 20,000 new units of affordable housing by Dec. 31, 2022. Since last year's announcement, the initiative has issued nearly 22,500 housing vouchers and deployed $450 million in federal grants. 
HUD announced various funding awards

HUD announced several funding awards last week. On Tuesday, HUD announced nearly $1 million in awards to keep foster youth housed. Funding will go to 17 public housing agencies across 11 states. On Wednesday, HUD announced $174.6 million in grant opportunities to support the development of affordable multifamily rental homes for low-income seniors. Non-profits will be offered funding through capital advances, which cover development or rehabilitation cost on eligible properties and project rental assistance contracts, offering project-based funding. This funding sets aside up to $15 million to support intergenerational households supporting elderly residents and serves census tracts indicating a poverty rate of 10 percent or less.
HUD announced Thursday that $180 million in grants would be awarded under the Choice Neighborhoods Implementation (CNI) program over the next few weeks. CNI intends to support local strategies addressing distressed neighborhoods with public or HUD-assisted housing through public and private dollars. The announcement granted funding to the City of Omaha/Omaha Housing Authority, Durham Housing Authority/City of Durham, Knoxville Community Development Corporation/City of Knoxville, and Tulsa Housing Authority/City of Tulsa. The new grantees join the list of 40 other neighborhoods that have received investments. Finally, on Friday, HUD announced that The Urban Institute and Horne, LLP received $1.4 million in funding for research on outcomes of renter outcomes during disaster recovery. The Urban Institute will utilize funds to gather a unique data set from the last ten years to assess disaster outcomes on affordable rental housing assisted by Community Development Block Grant—Disaster Recovery. Horne, LLP will work to understand better recovery outcomes of renter households funded by CDBG-DR funds, including focus groups and interviews with developers, landlords, and renters. 
Chart of the week
NCSHA finds affordable housing 30% more expensive to develop due to inflation

The National Council of State Housing Agencies (NCSHA) released a new report titled Filling Funding Gaps: How State Agencies are Moving to Meet a Growing Threat to Affordable Housing. The report analyzes development cost increases for Low Income Housing Tax Credit projects due to rising labor, materials, and financing costs. It concludes that unexpected cost increases are averaging an unprecedented 30 percent based on trends in 11 states. These cost increases put pressure on funding project cost gaps and resulted in fewer units being produced. COVID-19 State and Local Fiscal Recovery Funds (SLFRF) is one resource for filling these gaps. As of July, only 31 states had allocated those funds for affordable housing activities. SLFRF will not resolve the overarching issue but could benefit states that need to fill financing gaps for developments battling rising costs. 
What we're reading
Urban Institute published a new report titled Leveraging Financing to Encourage Landlords to Accept Housing Choice Vouchers that details the reluctance of landlords to accept housing vouchers and recommendations to improve voucher acceptance. In addition, the report suggests landlords who accept voucher holders should be eligible for government-sponsored enterprise financing if they are not already, as well as favorable financing for the construction or rehabilitation of accessory dwelling units for voucher holders.
The Brookings Institution hosted a webinar through Brookings Metro that highlighted findings from its recent report, Reducing poverty without community displacement: Indicators of inclusive prosperity in U.S. neighborhoods. The report offers a list of indicators for neighborhoods looking for inclusive prosperity, including positive economic growth, low risk of displacement, higher rates of homeownership, and increased housing density, among others. Neighborhoods represented in all indicators reduced poverty without displacing the local community.
The FHFA Office of the Inspector General published a report titled Enterprise Use of Artificial Intelligence and Machine Learning. The report examines how Fannie Mae and Freddie Mac currently use artificial intelligence (AI) and machine learning (ML) and what challenges the Enterprises are having with adopting both. The OIG notes that AI and ML pose heightened model, data, regulatory and compliance, and operational risks but are rich with benefits for processing information. Fannie Mae reports that it is proceeding too slowly in building up its AI/ML capability, while Freddie Mac observed that there are few accepted AI standards in the mortgage industry. 

Enterprise Community Partners published a new white paper, Home for Good: Strategies to Prevent Eviction and Promote Housing Stability. The paper seeks to highlight strategies to reduce eviction's long-term harm that often impacts people of color disproportionately. It offers a roadmap for advocates at various stages of the eviction process with a range of strategies and solutions to reduce eviction's harmful impacts while allowing for flexibility and customization of communities to meet their unique needs. 
The week ahead
Monday, September 26

Tuesday, September 27

Wednesday, September 28

Thursday, September 29

Friday, September 30
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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