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Weekly update from the National Housing Conference
November 3, 2019
President's Message I By David M. Dworkin
Dear Friend,

The United States is in the midst of a growing and unprecedented housing crisis that in many ways is, a tale of two very different housing markets. In communities with vibrant and growing economies like Denver, Colorado; Ann Arbor, Michigan and Nashville, Tennessee, it is a crisis of affordability. But in cities like Detroit, Michigan; Cleveland, Ohio and Memphis, Tennessee, as well as most rural communities, the opposite situation creates its own set of problems. There, home values are actually so low, and the costs of making a mortgage are so high, that lenders and builders can’t afford to produce and finance homes that are affordable to those who need them the most. The result is that most first time homebuyers either can’t buy homes they can afford, or can’t afford homes they need.
This strange crisis is a new one for our housing market; nothing like the bubble of housing values that devastated home prices and neighborhoods across the states. It is emblematic of a housing construction and finance system across the country that is in dire need of repair. This is why your membership in NHC and participation in one or more of the sub-groups to help draft a new National Housing Act for the 21 st century is so important. Please join us or renew your membership today!
As the National Housing Conference’s Paycheck to Paycheck database makes clear, it’s not just high-cost coastal communities like San Francisco but places like Nashville, Tennessee and Denver, Colorado, where a carpenter cannot afford to live in a home that he or she built.

David M. Dworkin
NHC President and CEO
News from Washington I By Tristan Bréaux and
Quinn Mulholland
HUD and Justice Department reach agreement on False Claims Act application

HUD announced on Monday that the agency had signed a memorandum with the Department of Justice setting guidelines on prosecutions under the False Claims Act. Under the memorandum, HUD will handle most of the enforcement of violations under the False Claims Act, which has been cited as a reason many large lenders stopped offering FHA-backed mortgages. In a statement, NHC President and CEO David Dworkin praised the announcement, saying, “The administration’s changes to the False Claims Act are an important step towards reversing a decade of unintended consequences that have forced many of the nation’s best capitalized and most regulated financial institutions out of the FHA market.”

False Claims Act (FCA) settlements “wiped out a decade of FHA profitability,” JP Morgan Chase’s Jamie Dimon said. In his 2015 letter to shareholders, Dimon said that the bank drastically cut its FHA lending in 2015 due to the risk of a FCA charge from the government, among other factors. Between 2009 and 2016, when the Justice Department began using the False Claims Act in mortgage fraud cases, banks have agreed to over $7 billion in FCA settlements from lenders. By comparison, military procurement fraud settlements amounted to only $3.6 billion. 
The last FCA settlement with Quicken Loans resulted in a $32 million settlement for 109 “defective” loans. According to Urban Institute, from 2013 to 2019, nonbank share of government loan originations (FHA, VA, USDA loans) grew from less than 35% to 86% today. The False Claims Act (FCA), 31 U.S.C. §§ 3729 – 3733, was enacted in 1863 in response to defense contractor fraud during the American Civil War when defense contractors falsely sold lame mules and shoddy uniforms to the Union Army.

HUD Secretary Ben Carson told HousingWire that in the wake of the financial crisis, “the False Claims Act became a monster that started chasing everybody around the room, making their lives miserable, causing them an inordinate amount of pain. So [the banks] got out [of FHA lending]. But now, the monster has been slayed.” And on Tuesday, FHA Commissioner Brian Montgomery said at an MBA conference that several banks have already committed to resuming FHA lending following the announcement.
FHFA releases strategic plan and scorecard for GSEs

On Monday, the FHFA released its annual scorecard for Fannie Mae and Freddie Mac, which included instructions to the GSEs to “prepare for transition out of conservatorship.” At a speech at the Mortgage Bankers Association’s annual conference the same day, FHFA Director Mark Calabria declared that “real change has begun, and we are finally building momentum for lasting mortgage-finance reform.” The scorecard comes in the wake of FHFA’s announcement at the end of September that Fannie and Freddie would be allowed to rebuild some of their capital reserves, an important milestone on the road to the end of the GSEs’ conservatorship. Calabria also said at the MBA conference that Fannie and Freddie should not compete with each other for market share.
Census Bureau releases third quarter homeownership data

The Census Bureau released its quarterly homeownership report on Thursday, showing that the overall homeownership rate rose in the third quarter of 2019 to 64.8 percent, tied for the highest the rate has been since 2014. The data showed that, for those younger than 35, the homeownership rate was 37.5 percent, a five-year high for that age group. Black homeowners also made significant gains, with the black homeownership rate rising over two percentage points since the second quarter of 2019, the highest gain for any racial group.

On a related note, the Washington Post published an article on Thursday examining the impact that student loan debt has had on the homeownership prospects of black millennials, featuring an interview with Donnell Williams and Antoine Thompson of the National Association of Real Estate Brokers and Lawrence Yun of the National Association of REALTORS.
NHC joins White House event on affordable housing

NHC joined other national housing leaders at a White House conference on affordable housing held in the Indian Treaty Room. The meeting covered a wide range of issues, including local barriers to affordable housing, rising labor and land costs, Opportunity Zones and the growing wealth gap. NHC President and CEO David Dworkin raised several issues including importance of addressing the housing supply issues because prices could rise in a recession as supply is constrained even more in a bad economy; crushing development fees in California that can be as high as $100,000 per unit, even for affordable housing units; and the need to address the fact that black homeownership is lower today than it was in 1968 when mortgage discrimination was legal. 
Habitat for Humanity unveils federal policy agenda

On Monday, Habitat for Humanity released the Cost of Home Federal Policy Agenda, which proposes 10 policy solutions to address the national affordable housing crisis. The policy solutions cover areas from increasing the supply of affordable homes to increasing access to credit for underserved borrowers to optimizing land use for affordable homes. The policy agenda is part of Habitat for Humanity’s Cost of Home campaign, which set a goal of 10 million people with increased home affordability over the next five years. Habitat for Humanity is hosting a webinar on Thursday, Nov. 21 at 2 p.m. to go over the Cost of Home Federal Policy Agenda, which you can register for here.
Senate passes spending bill in a busy week for housing on the Hill

On Thursday, the Senate passed a package of bills that would fund nine agencies including HUD and the USDA, with increased funding for several important affordable housing programs. Funding bills for several other agencies were held up in a partisan dispute over funding for President Trump’s border wall. Included in the spending package that passed was an amendment sponsored by Senators Tim Scott (R-S.C.) and Doug Jones (D-Ala.) that would appropriate funds for the USDA to provide loans to help resolve heirs’ property issues. The House of Representatives also passed a slew of bills last week, including the Financial Inclusion in Banking Act, sponsored by Representative David Scott (D-Ga.). Meanwhile, Representatives Brad Wenstrup (R-Ohio) and Danny Davis (D-Ill.) introduced the Housing for Homeless Students Act of 2019, which would make homeless students eligible for LIHTC housing. And congressional Democrats sent two letters to the Trump administration on housing issues, with House Financial Services Committee Chairwoman Maxine Waters criticizing President Trump for his homelessness proposals and a group of Senate Democrats demanding that HUD Secretary Ben Carson retract his remarks about the rights of transgender people.
Another financier accused of profiting off Opportunity Zones

The New York Times published an in-depth article last weekend on the extent to which Wall Street tycoon Michael Milken is in a position to personally gain from changes his think tank, the Milken Institute, has advocated for to the Opportunity Zones program. The article quickly generated fierce criticism of the program, with Democratic presidential candidate Bernie Sanders tweeting that he would “end this tax scam,” referring to the Opportunity Zones, and Senate Finance Committee Ranking Member Ron Wyden (D-Ore.) saying in a statement, “Secretary Mnuchin steered tax breaks worth potentially millions of dollars to a longtime crony.” Milken denied any wrongdoing, describing the New York Times article as “a hit job” in a statement to the Reno Gazette Journal. The Treasury Department and the IRS, meanwhile, announced on Thursday a proposed form to collect information on Opportunity Zone investments, drawing measured praise from Wyden.
Chart of the Week
Ginnie Mae nonbank share of government loan originations rises to an all-time high

The Urban Institute Housing Finance Policy Center’s October 2019 Monthly Chartbook shows that the nonbank share of government loan originations for Ginnie Mae, including FHA, VA, and USDA loans, increased to an all-time high of 86 percent in September. This could be in part due to the overuse of the False Claims Act, which drove large lenders out of the FHA market.
What we're reading
The Brookings Institution published a report by Jenny Schuetz on the use of local zoning regulations and their impact on housing affordability. In the report, Schuetz argued that policymakers should focus on how well housing markets are functioning, rather than whether specific policies are adding constraints to the housing supply. Read the report here.

In an article published on Thursday, the Baltimore Sun examined the experience of voucher holders trying to find housing in Baltimore County. The article documented how many landlords refuse to accept vouchers, making it harder for voucher holders to find an apartment, as the county considers banning source of income discrimination. Read the article here.

The University of New Hampshire and CNN’s most recent survey of New Hampshire Democratic voters showed a three-way race between Bernie Sanders, Elizabeth Warren and Joe Biden. According to the survey, Bernie Sanders had the highest favorability among Democratic candidates, with Andrew Yang and Amy Klobuchar experiencing the largest gains in net favorability from July to October. Read the full survey results here.
The week ahead
Monday, November 4
·          Enterprise Community Partners webinar on affordable housing, 1:30 - 2:30 p.m.

Thursday, November 7

Friday, November 8

Sunday, November 10
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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