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Weekly update from the National Housing Conference
News from Washington
Housing organizations urge measured approach to ending GSE conservatorship

In light of recent concern that Fannie Mae and Freddie Mac could be rushed out of conservatorship, several housing organizations sent a joint letter to Treasury Secretary Steve Mnuchin expressing their views on the matter. The American Bankers Association, Mortgage Bankers Association, National Association of Home Builders and National Association of REALTORS® cautioned that a hasty release from conservatorship could “undermine investor confidence, create volatility in the single-family and multifamily mortgage markets, and impede access to credit for consumers.” Instead, the organizations encouraged the Federal Housing Finance Agency (FHFA) to use a mix of legislative and administrative actions to correct the structural flaws that led to the GSEs’ conservatorship in the first place. When asked about the timeline for release from conservatorship at a recent Senate Banking Committee hearing, Secretary Mnuchin said, “I don’t think they should be let out from conservatorship without appropriate capital.”

Earlier this month, House Financial Services Committee Chair Maxine Waters (D-Calif.) sent a letter to FHFA Director Mark Calabria, in which the congresswoman called the agency’s focus on the release of the GSEs from conservatorship during the pandemic “inappropriate.”
FHFA introduces proposed GSE liquidity requirements

On Thursday, FHFA published a notice of proposed rulemaking to impose new liquidity requirements on Fannie Mae and Freddie Mac. Designed to be a “companion” to the recently finalized capital rule, the proposed rulemaking would expand existing liquidity requirements. The four requirements introduced by FHFA include: a short-term 30-day cash-flow requirement, with an additional $10 billion cushion; a 365-day requirement extending short-term cumulative cash outflow analysis to a full year; mandating the ratio for long-term unsecured debt to less-liquid assets exceed 120%; and requiring the ratio for the spread duration of unsecured debt to the spread duration of retained portfolio assets exceed 60%. According to FHFA, both Fannie Mae and Freddie Mac currently “meet or exceed all requirements of the proposed rule.”

“During the 2008 financial crisis, Fannie Mae and Freddie Mac did not have enough truly liquid assets nor did they have consistent access to the longer-term unsecured debt markets. This liquidity and funding failure, along with their low capital levels, necessitated placing the enterprises into conservatorship," said FHFA Director Mark Calabria. “Today's proposed rule will better ensure that the enterprises are positioned to fulfill their countercyclical mission."
Fannie Mae highlights LIHTC's central role in serving areas with persistent poverty

A new Freddie Mac white paper examined the role of the Low-Income Housing Tax Credit (LIHTC) program in supporting the multifamily housing market and general housing needs of low-income households in rural Persistent Poverty Counties (PPCs). Regions struggling with persistent poverty “are also commonly the areas where renters struggle to find safe, quality and affordable housing,” Freddie Mac noted. “In these areas, policy initiatives and market incentives that advance the development of housing are crucial in combating the negative economic effects of an inadequate housing supply.”

Although single-family housing makes up the majority of rental housing in rural PPCs, 40% of multifamily housing in these areas is supported by LIHTC – more than three times higher than the national average. Freddie Mac pointed out ways to improve program usage, including better aligning incentives to prioritize high poverty areas and addressing weak “CRA appetite” among investors in rural PPCs. Freddie Mac concluded that “the need for subsidized housing in rural PPCs is critical, as an outsized share of renter households are rent burdened and living in inadequate housing.”
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Commerce Home Mortgage is a mortgage banking company that is certified by the U.S. Treasury, a CDFI-certified lender, and a licensed seller/servicer with Fannie Mae, Freddie Mac and Ginnie Mae. Commerce Home Mortgage aims to empower underbanked homeowners and communities by providing access to prime capital.

The National Association of Housing and Redevelopment Officials (NAHRO) is a membership organization of 19,000 housing and community development providers and professionals throughout the U.S. NAHRO members create and manage affordable housing for low- and middle-income families and vibrant communities that enhance the quality of life for all.
VA proposal offers soft landing for homeowners exiting forbearance

The Department of Veterans Affairs (VA) issued a proposed rule that would create a new COVID-19 Veterans Partial Claim Payment Program. The temporary program would act as an intermediate step for veteran homeowners exiting a CARES Act forbearance who may not be able to return to making normal payments. “VA’s loan administration policies and oversight have saved approximately 100,000 veterans from foreclosure annually over the past four fiscal years,” the agency said in its impact analysis of the proposed rulemaking. “VA is concerned, however, that these policies may not be enough to help the significant number of veterans who have elected to enter a CARES Act forbearance as they exit forbearance and try to resume making monthly guaranteed loan payments.”

Under the proposed program, the servicer could file a partial claim for the amount required to bring the mortgage current, at which time the VA would assume the role of mortgage investor. The veteran homeowner would then be responsible for repaying the partial claim amount to the VA over time at a 1% fixed annual interest rate. The partial claim amount, however, could not exceed 15% of the unpaid principal of the guaranteed loan amount as of the date the veteran initiated a CARES Act forbearance. Comments are due by January 8, 2021.
Mortgage servicing, HMDA and TRID on CFPB's 2021 agenda

The Consumer Financial Protection Bureau (CFPB) published its rulemaking agenda for next year. Between now and spring 2021, the agency plans to tackle several housing-related issues. Following this summer’s interim final rule on mortgage servicing during COVID-19, CFPB plans to issue a notice of proposed rulemaking (NPRM) in the spring that will include permanent amendments to mortgage servicing requirements for borrowers affected by disasters. CFPB also plans to publish two NPRMs on the Home Mortgage Disclosure Act (HMDA), addressing certain required data points as well as public disclosure. Based on the UK Financial Conduct Authority’s recent announcement that LIBOR may continue to be published through June 2023 – past the currently scheduled expiration of December 2021 – CFPB said it will publish the final LIBOR transition rule later than the original January 2021 target date.

Looking ahead to later in 2021, CFPB may consider regulatory actions related to the Truth in Lending Act (TILA) / Real Estate Settlement Procedures Act (RESPA) Integrated Disclosures (TRID) in response to feedback received on the 2019 Request for Information and 2018 Calls for Evidence.
Chart of the week
Chart of the week: Inequality worsened after the last economic crisis

A new report from the Mortgage Bankers Association’s Research Institute for Housing America examines how income inequality worsened in the aftermath of the Great Recession. Despite the $2.5 trillion increase in total household net worth from 2010 to 2013, median wealth declined. “Over 90% of the increase accrued to the rich; the small remainder accrued to the middle-wealth households,” the report finds. “The poor suffered a further diminution in their wealth; they had an additional $18 billion loss in 2013.”
What we're reading
Enterprise Community Partners announced a new five-year $3.5 billion initiative, including a $25 million commitment from Netflix, to “dismantle the deeply-rooted legacy of racism in housing – from the types of homes that are built, where they’re built, who builds them, and the wealth that is generated from them.” The Equitable Path Forward initiative will work to fill the capital gap, strengthen housing providers and support new career pathways for more diverse leadership in real estate.

Gothamist reports that New York City’s homeless outreach strategy, which concentrates on homeless individuals using the city’s subway system, has helped more than 600 homeless residents secure housing through stabilization beds. Giselle Routhier, policy director at the Coalition for the Homeless, said, “The use of stabilization beds, particularly in hotels, is clearly successful in terms of providing things that people really need and want.”

The recent progress to approve and begin distribution of the COVID-19 vaccine bolstered Fannie Mae’s recent Economic and Housing Outlook. The housing market, however, is unlikely to maintain its record-breaking growth in 2021. Fannie Mae’s commentary notes that “while robust housing activity is still expected over the next year, signs of a pullback from an extremely brisk pace are now appearing, and we expect sales in coming months to taper off somewhat.”
The week ahead
In observance of the upcoming holidays, NHC’s Member Brief will not be circulated on December 27, 2020, and January 3, 2021.
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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