Weekly update from the National Housing Conference
May 8, 2019
President's Message I By David M. Dworkin
Dear Friend,

In this last of three notes on the Community Reinvestment Act (CRA), we look more closely at the fourth of NHC’s principles for successful CRA modernization. NHC believes that any new CRA regulatory regimen must:

  1. Increase investment in communities that are currently underserved;
  2. Benefit more low- and moderate-income (LMI) people, particularly people of color, who live in those communities;
  3. Ensure that CRA lending and investment does not lead to displacement of the very people it is meant to help; and
  4. Make both bank performance and government enforcement more transparent and predictable.

CRA regulations must balance often competing requirements of clarity and flexibility. This is an issue the framers of the CRA and previous efforts at regulatory change have had to struggle with. If the regulatory requirements are too proscriptive, then they won’t be flexible enough to allow banks to make strategic business changes within their framework. If they are too flexible, they won’t provide the clarity that banks need to incorporate the value of CRA treatment when making lending decisions. This inherent tension is made even more complicated by the diverse set of regulated entities that the CRA regulations must address.

Consistency of definition is a critical component for aligning various federal programs, tax incentives and regulatory requirements. Banks must have confidence at the time they make financing decisions and develop new financing products that these activities will receive CRA credit. This information is critical to the most successful element of the CRA’s regulatory structure, often referred to as the “thumb on the scale.” 

Many types of community development investments are obvious, like the investment in LIHTC deals within CRA assessment areas, but others like unsubsidized affordable housing in low- and moderate-income census tracts require more clarification. For investments that do not fit into a uniform designation, a timely judgement should be delivered by the appropriate examiner that will be binding throughout the examination period and apply to similar investments presented to the same agency by the same bank.

Regulators must keep in mind that communities are complex ecosystems. One of the most important lessons learned over the past 40 years is that comprehensive community development strategies that address housing, small business investment and job creation are often interdependent. The CRA has provided significant help to disadvantaged communities but improvements must be made in how CRA can encourage more strategic coordination within communities as well as financial institutions resulting in a more holistic – and ultimately successful – approach to community development.

There’s no better time to join NHC! NHC is leading on exciting initiatives on CRA, black homeownership, housing finance reform and more. We are also developing a new 21st century housing bill. Make sure your organization’s interests are represented and join or renew today. We continue to work across partisan lines to address America’s biggest housing challenges, and this work is rooted in our greatest asset— our members. Organization memberships start at $1,000.

David M. Dworkin
NHC President and CEO
News from Washington I By Tristan Bréaux and
Quinn Mulholland
Reminder: Register for the Restoring Neighborhoods Task Force webinar

The May Restoring Neighborhoods webinar is scheduled for next Tuesday, May 14 at 3:30 p.m. EDT. The webinar will feature a presentation from Laurie Goodman, vice president of housing finance policy at the Urban Institute on cash out refinances. Cash out refinances are a two-edged sword. On one hand, they allow people to monetize their single largest asset— their home equity. On the other hand, cash out refinance mortgages have historically performed much worse than rate/term refinances and have been prone to abuses. Prudently underwritten cash out refinances, and other forms of home equity extraction will prove to be a very valuable tool, as more people retire with most of their wealth in their home. Register here.
Dworkin submits testimony for HFSC subcommittee hearing on black homeownership

This morning at 10 a.m., the House Financial Services Subcommittee on Housing, Community Development, and Insurance, will hold a hearing on minority homeownership. NHC President and CEO David Dworkin was asked by the Subcommittee’s minority staff to submit written testimony for the hearing. In his testimony, Dworkin reviews some of the solutions discussed by NHC’s Black Homeownership Working Group members on reducing the racial homeownership gap. Other witnesses testifying at the hearing include Nikitra Bailey of the Center for Responsible Lending, Joseph Nery of the National Association of Hispanic Real Estate Professionals, Jeffrey Hicks of the National Association of Real Estate Brokers, and JoAnne Poole of the National
Association of REALTORS®.
CFPB proposes new rules on HMDA

The Consumer Financial Protection Bureau announced last week that it would propose changes to rules under the Home Mortgage Disclosure Act that would ease reporting requirements. The rule changes would exempt over a third of lenders from having to submit mortgage data to the government under HMDA. The new rules come on the heels of rule changes by the CFPB last year that also relaxed HMDA reporting requirements. In a statement, Senate Banking Committee Ranking Member Sherrod Brown condemned the rule changes, saying that “reducing HMDA reporting will make it easier for lenders to discriminate against people of color, and it will reduce access to credit in small towns and rural areas.”
Bernie Sanders pens op-ed on affordable housing crisis

Democratic presidential candidate Bernie Sanders wrote an op-ed in the Las Vegas Sun last week on what the Senator described as “the crisis of affordable housing.” In the op-ed, Sanders cited the National Low Income Housing Coalition’s recent report on the lack of affordable units available to low-income renters, and argued for an expanded investment in federal housing programs including the Housing Trust Fund and public housing. And on Friday, Sanders highlighted the issue of gentrification in Greenville, South Carolina in a Twitter video.
Wall Street report finds big banks use higher rates to attract GSEs

A Monday report from the Wall Street Journal found that big banks have been utilizing higher rates over the past year to attract more deposits from Fannie Mae and Freddie Mac. The goal of attracting higher deposits, the report found, was to replace overnight loans, which used to be the dominant type of funding banks use to manage daily activities. The Federal Home Loan Banks, for example, shifted $11 billion from overnight loans into deposit accounts. “We earn 0% on our Fed account holdings so we are always looking at short-term investment opportunities. You’ll see us doing this through a variety of ways,” Council of Federal Home Loan Banks Executive Vice President and NHC board member David Jeffers told the Wall Street Journal. 
Congressional Democrats push for carbon monoxide detectors in public housing

On Monday, Senator Kamala Harris (D-Calif.) and Representatives Jesús “Chuy” García (D-Ill.) and Joe Cunningham (D-S.C.) sent a letter to the leadership of the House Financial Services Committee and Senate Banking Committee advocating for mandatory carbon monoxide detectors in federally subsidized housing. The three Democratic lawmakers introduced the Safe Housing for Families Act in March, which would require carbon monoxide detectors, and advocated for its passage in the letter. The letter came after a new NBC News investigation last week found that that two more people have died from carbon monoxide poisoning in HUD-subsidized housing in Michigan. This was on top of the 11 deaths found by NBC News in its original investigation into carbon monoxide poisoning in public housing.
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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