Weekly update from the National Housing Conference
News from Washington | By Luke Villalobos
McWilliams resigns from FDIC after bank merger fight

Federal Deposit Insurance Corporation (FDIC) Chair Jelena McWilliams announced on December 31 that she would resign in February. She is expected to be replaced by FDIC board member Martin Gruenberg. 

McWilliams, who was appointed in 2018, had been locked in a dispute with the three other FDIC board members over changes to the agency’s bank merger policy. That dispute escalated in early December when Gruenberg, Consumer Financial Protection Bureau Director Rohit Chopra, and Acting Comptroller of the Currency Michael J. Hsu, voted to request comments on changes to FDIC’s bank merger process without McWilliams support. McWilliams alleged in a Wall Street Journal op-ed that her colleagues were engaged in a “hostile takeover” of the agency. Observers speculated that though it was unclear whether the board’s vote was legal, it constituted a vote of no confidence and signaled to McWilliams that she could not continue to lead the agency productively.

In the short term, McWilliams’ resignation is a win for progressives, who had seen their agenda reined in by the more conservative McWilliams. In particular, McWilliams' resignation could speed up modernization of the Community Reinvestment Act by reducing the differences between the leaders at the three agencies that enforce the anti-redlining law.

However, some warned that the fight had damaged the agency's independence from partisan politics, potentially compromising its ability to act as a steady hand in financial markets going forward. NHC President and CEO David Dworkin told the American Banker that “at some point we’re going to have to ask ourselves: How tied to the political pendulum do we want our regulatory agencies to be, particularly when it swings back hard and fast?”
FHFA announces 2022-2024 housing goals

On December 22nd, the Federal Housing Finance Agency (FHFA) announced the finalized 2022-2024 Single-Family and 2022 Multifamily Housing Goals for Fannie Mae and Freddie Mac (the Enterprises). The final rule establishes annual housing goals for single- and multifamily mortgages purchased by the Enterprises, with accompanying benchmarks and subgoals that encourage equitable access to affordable housing for low- and moderate-income families.

FHFA introduced two new single-family home purchase subgoals that target minority and low-income neighborhoods based on census tracts. FHFA Acting Director Sandra Thompson stated, "The new subgoals for minority and low-income census tracts will help preserve and support affordable housing opportunities as well as allow those communities to retain ownership of the neighborhoods they helped build."

The new housing goals come two days after FHFA released its final 2020 Housing Goals Performance Determinations for Fannie Mae and Freddie Mac. In 2020, Fannie Mae met all its single-family and multifamily housing goals. Freddie Mac met all of its goals for multifamily housing, as well as those for low-income single-family purchases. However, Freddie Mac missed its low-income finance goal and will be required to report to FHFA on how it plans to improve on this during the 2022-2024 cycle.
FHFA rejects Enterprise DTS plans

The Federal Housing Finance Agency (FHFA) announced Wednesday that had rejected both Fannie Mae’s and Freddie Mac’s Duty to Serve (DTS) plans for 2022-2024. In an notice to stakeholders, FHFA said that it had reviewed both plans and determined neither met the non-objection standard for any of the three underserved markets Fannie Mae and Freddie Mac are obligated to serve. Both Enterprises must now submit revised plans to FHFA, though in the meantime they may continue to implement the rejected plans.

FHFA’s rejection of the plans was praised by the Underserved Mortgage Market Coalition, a group spearheaded by the Lincoln Institute of Land Policy that includes NHC. The coalition argued that the plans failed to meet the “spirit or the letter” of the DTS regulation. 

NHC President and CEO David Dworkin told HousingWire that FHFA’s rejection of the plans would give the Enterprises the opportunity to “stretch their capabilities” in new plans. “The GSEs’ obligations to serve underserved markets can be much more robust, and these plans don’t do that,” he said.
CFPB details response issues at big three credit bureaus

On Wednesday, the Consumer Financial Protection Bureau (CFPB) released a new report on response deficiencies from the "Big Three" credit bureaus, Equifax, Experian, and TransUnion. The Big Three reported relief in response to less than 2% of consumer complaints, a massive reduction from 2019's reported 25%. Consumers reporting on potential errors in their credit files often included claims of identity theft and inaccuracies of medical debt. 

CFPB's report shows that none of the bureaus met their statutory obligations to adequately provide substantive responses to consumer complaints, particularly if those complaints were sent in by an authorized third party. The bureaus relied heavily on template responses rather than providing individualized guidance, and beginning in 2020 both Experian and TransUnion stopped responding to consumer complaints if they suspected a third party was involved in submission. Equifax and TransUnion promised to investigate many cases but failed to provide the outcomes of those investigations to the CFPB. 
FHFA announces new upfront fees

On Wednesday, FHFA announced new upfront fees in the Enterprise Pricing Framework for second home and high balance home loans sold to the Enterprises. The new framework, which comes into effect on April 1, 2022, will increase upfront fees for high balance loans between 0.25%-0.75% and 1.125%-3.875% for second home loans, depending on loan-to-value ratio. Per FHFA, high balance loans are determined in certain designated areas in which housing prices fall above the baseline conforming loan limit. The move is intended to strengthen the Enterprises' regulatory capital position over time and provide more equitable and sustainable access to homeownership for low- and moderate-income homebuyers.

Loans within affordable programs, including HomeReady, Home Possible, HFA Preferred and HFA Advantage, are excluded from the fees. Loans to first-time homebuyers in high-cost areas who have incomes at or below 100% AMI are also exempt from the high balance upfront fees. The change was met with strong opposition from the National Association of Home Builders (NAHB), who argued that increasing the cost of second homes could dampen demand for them even as many families look for more space during the pandemic. But the move garnered broader support from the affordable housing industry, which praised FHFA's decision to focus on homes that serve as primary residences.
FHFA reports two-point g-fee decrease in 2020

On December 21, FHFA released its annual report on single-family guarantee fees (g-fees) Fannie Mae and Freddie Mac charge in exchange for guaranteeing that investors in their mortgage-backed securities receive principal and interest payments. G-fees are intended to compensate the Enterprises for the risk they assume by guaranteeing payment to investors and covering some operational costs. However, g-fees are also used as a generator of federal revenue, most recently as part of the Infrastructure Investment and Jobs Act of 2021, which extended federally-mandated g-fees until 2032 over the objections of housing stakeholders.

FHFA reported that in 2020 the average g-fee for single-family loans decreased two basis points to 54 for all loan products combined. The report also provides breakdowns of fees by product type, risk class, and seller delivery volume.
Freddie Mac to ramp up CRT in 2022

Freddie Mac announced Wednesday that it would increase issuance under its credit risk transfer (CRT) program in 2022 to at least $25 billion, from $18 billion in 2021. Freddie Mac says that it will increase CRT issuance in response to new capital requirements in FHFA’s Enterprise Capital Framework Rule, which requires Freddie Mac and Fannie Mae to decrease taxpayer risk.

CRT programs reduce taxpayer risk by selling mortgage-backed securities (MBS) that are only partially guaranteed by the Enterprise that sells them. Pre-payments on guaranteed loans in the MBS are used to satisfy the unpaid balance of the guaranteed loans, leaving unsatisfied only those loans whose risk has been assumed by the investor and transferring risk away from Fannie Mae and Freddie Mac.
Freddie Mac expands Single-Family Green Bond program

Freddie Mac announced Monday that it would expand its Single-Family Green Bond program to cover newly constructed properties that rely on renewable energy or are especially energy-efficient. The move increases the number of mortgages eligible for the program, which was previously limited to refinances that funded homeowners' installation of solar panels on their properties. 

Freddie Mac has increased its emphasis on green mortgages in recent years, driven in part by its obligations under the Duty to Serve program. On December 27, Freddie Mac released a white paper touting the impact of its multifamily Green Up program, which funds green improvements for workforce housing. Freddie Mac first created the Green Bond program in 2019 to drive more capital into the Green Up program. Monday's announcement was the latest in several expansions Freddie Mac has made to eligibility for the program.
Hearings on Brainard, Powell and Thompson set for next week

The Senate Banking Committee has scheduled confirmation hearings for three of President Biden’s key nominees for next week.

On January 11 at 10 a.m., the committee will hold a hearing on Biden’s nomination of Jerome Powell to a second term as chair of the Federal Reserve Board of Governors. On January 13, also at 10 a.m., the committee will hold a hearing on Biden’s nomination of Lael Brainard as vice chair of the Federal Reserve Board of Governors and Sandra Thompson as director of the Federal Housing Finance Agency.

Both hearings will be live-streamed on the committee’s website.
FHA delays Catalyst compliance and HECM comment deadlines

The Federal Housing Administration announced last week that it would push back the deadline for mortgagees to adopt its new single-family default monitoring system. FHA also announced that it would allow more time for stakeholders to submit comments on its new home equity conversion mortgage (HECM) guidance.

Mortgagees will now have until March 1 to adopt FHA Catalyst to submit reports on single-family defaults, HECM stakeholders will have until January 31 to submit comments on FHA’s new guidance.
MBA seeks Affordable Housing Program and Policy Specialist

The Mortgage Bankers Association (MBA) is currently seeking a Program and Policy Specialist as part of their Affordable Housing Initiatives team.

The candidate would help manage key affordable housing efforts, work on program and policy initiatives at the national and local level, and manage communications. Applications can be submitted here
HUD announces funding and disaster relief

In December, the Department of Housing and Urban Development (HUD) announced two funding awards: over $18 million for housing assistance for veterans and a $9 million loan guarantee for the City of Cleveland to develop a 200-unit mixed-use property. The $18 million award will go to HUD's Veterans Affairs Supportive Housing as vouchers across 33 states through 103 Public Housing Agencies (PHAs) and aim to provide housing to veterans currently experiencing homelessness. The $9 million loan to Cleveland came through the Section 108 Loan Guarantee Program, providing Community Development Block Grant recipients with low-cost financing for community development. 

HUD also announced several rounds of disaster assistance for AlabamaArkansasColoradoKentucky, and the Confederated Tribes of the Colville Reservation in response to severe storms and wildfires. The relief includes providing immediate foreclosure relief, offering mortgage insurance and home rehabilitation, and ensuring HUD-approved counseling agencies are available, among other strategies. 
Chart of the week
Chart of the week: Home forfeitures dropped during pandemic

The number of deeds-in-lieu and short sales decreased along with foreclosures during the pandemic, FHFA reported in its Foreclosure Prevention and Refinance Report for the third quarter of 2021. Home forfeitures fell to lows not seen at least since before the Great Recession, demonstrating the success of pandemic-era assistance to homeowners in avoiding even widespread “soft exits” to homeownership.
What we're reading
An article in Slate covers the burgeoning movement pushing to reverse widespread requirements that apartment buildings have two staircases, which supporters say is unnecessary and fuels house price inflation. Though the purported reason for such requirements is fire safety, architect Michael Eliason says that there is no evidence a second staircase reduces risk to residents and that they are unheard of across much of Europe and Asia. Instead of increasing fire safety, he says, second staircase requirements force developers to reduce the size of units and pass over unconventional lots, contributing to housing shortages.

Freddie Mac study finds that high opportunity areas neighborhoods with good access to transit, jobs, education, and other amenities that increase social mobility are often inhospitable to middle-income renters due to stringent zoning requirements. The study finds that high-opportunity areas are disproportionately zoned for low-density, single-family housing. Just 10.7% of rental units available in high opportunity areas are affordable to families making less than 60% of area median income.
CityLab reports that 97.5% of apartments are occupied in the United States, the highest figure on record and a testament to the severity of the nationwide housing shortage. The past year's rise in occupancy rates did not display the usual seasonal variation of rising in the winter and falling in the summer, which CityLab attributes to the strange housing market dynamics of the pandemic. 

white paper from House Canary finds that automated home appraisal technology is better at producing accurate and bias-free home appraisals than typical appraisal methods. According to the white paper, House Canary's automated valuation model had no evidence of racial bias as measured by the difference between the appraised value and sale price for each racial group. 
The week ahead
Monday, January 10
Tuesday, January 11
ULI: Equitable development, noon – 2 p.m. ET
Wednesday, January 12
HUD: PIT office hours, 1:30 – 3 p.m. ET
Thursday, January 13
Friday, January 14
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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